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Arab sovereign wealth funds boost assets

Issac John / 22 June 2010

DUBAI - Arab sovereign wealth funds boosted their size marginally in the first quarter of 2010 to $1.64 trillion aided by new cash injections and market recovery, data compiled in a recent study show.

“Along with new injections by their parent sovereigns, Arab sovereign wealth funds (SWF) are estimated to hold a total of as much as $1.62 trillion in assets in 2009 — increasing marginally to $1.64 trillion as of March 2010 — compared to holdings of between $0.9 and $1.5 trillion in 2007,” said the study titled “How Have Arab SWFs Been Affected by the Financial Crisis?”

Apart from the six-member GCC bloc, other Arab countries accounting for a share of the massive sovereign wealth invested globally include Algeria, Libya, West Bank/Gaza and Sudan, the study shows.

While Arab SWFs grew through the end of 2007, the financial crisis had significantly dented the value of their assets under management in 2008. In most cases, however, the subsequent market recovery has meant that SWFs are likely to have regained much of the losses they incurred in 2008, it said.

According to the US-based SWF Institute, GCC’s sovereign wealth funds currently have assets under management of well in excess of $1.3 trillion.

“With the exception of Japan, Asia-Pacific will grow twice the global rate raising its share of global wealth from 15 per cent last year to 20 per cent within four years, include India and Brazil into the equation and the economic decoupling theory is alive and well and a more equitable share of wealth maybe emerging,” said, Chris Speller, Cityscape Group Director.

Many of the thriving economies are also witnessing robust development of their real estate markets, especially in Asia-Pacific and the BRIC countries. “Indeed it is this combination of investment and development that is driving interest in Cityscape Global 2010, which is due to take place at the Dubai World Trade Centre on 4-7 October,” said Speller.

In 2009, the largest investor among the GCC based SWFs was the Qatar Investment Authority, which invested more than $32 billion in 14 publicly reported transactions, suggests a  study conducted by Monitor Group, a consultancy in Cambridge, Mass., and Fondazione Eni Enrico Mattei, a research institution based in Milan, Italy.

Asia Pacific was the most popular region for sovereign wealth fund investments, with 32 deals, while Europe ranked second with 29 transactions. The Middle East and North Africa overtook North America in terms of investment volume, with 21 deals versus North Americ---a’s 19, most of which took place in the final quarter of the year.

The SWF Institute put the total wealth controlled by SWFs worldwide at around $3.5 trillion at the end of 2009whiel analysts at the recent International Forum of Sovereign Wealth Funds in Sydney, assessed it to be between $2 trillion and $3 trillion.  But research groups and think-tanks have more recently said the number was closer to $3.6 trillion to $3.8 trillion.

The most active funds, in terms of the number of deals, were the China Investment Corp and the Government of Singapore Investment Corp, making 17 and 18 publicly reported investments, respectively.

The data in the first and second quarters last year were the lowest since 2005 and 2003. Sovereign wealth fund deal volume fell 40 percent to 113 deals worth $68.8 billion last year.  The researchers also found that the funds invested less in financial services, from 49 deals worth $81.7 billion to 28 deals worth $10.2 billion. Sovereign funds were also more cautious in real estate acquisitions, dropping by more than half.

Among the GCC countries, Qatar is also expected to be the largest source of global real estate capital during 2010, real estate consultancy Jones Lang LaSalle said in a report published. The country, which has emerged as “a new global powerhouse,” is expected to rank as the number one global overseas investor in 2010, according to the firm.


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