Mideast Sovereign Wealth Funds Learn To Adapt To Low Oil Price World

Some, but not all, Gulf SWFs are selling assets with lower prices. Others spot new opportunities, especially in Asia. Saudi Arabia's PIF, set to be the repository of the proceeds of the planned Aramco privatization, is already stepping up purchases.

Sustained low oil prices since late 2014 have impacted the investment strategies of the full spectrum of companies across the Middle East. Sovereign Wealth Funds (SWFs) are no exception.

SWFs from the six GCC countries alone account for a massive $2.9 trillion or 40% of total global holdings, according to figures from the New York-based SWF Institute (SWFI), with the region containing four of the five biggest funds: on a by-country basis the UAE is second only to China in overall holdings (see chart). The broader MENA region as a whole has $3.1 trillion of assets under management.

Asset manager Invesco’s fourth annual Global Sovereign Asset Management report, released last week, indicates a major drawdown in Mideast SWF holdings over the 12 months to March 2016. The 15 Middle Eastern sovereign funds surveyed – accounting for the vast bulk of overall regional holdings – collectively either withdrew or canceled planned investments equating to 7% of assets, while new investments amounted to just 3%. Globally, the reverse occurred - new investments accounted for 7% of assets and withdrawals stood at 3%.


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