The Gulf Sovereign Wealth Funds: Accumulating Wealth and Investing Actively to Support Their Economic GoalsSovereigns
Sovereign Wealth Funds (SWFs) in the Middle East, particularly in the oil and gas producing Gulf countries, have benefitted notably from the latest boom in oil and gas prices. Boosted by the windfall, most of the Gulf SWFs have seen a significant increase in their assets and have been investing actively. Their investments are in various sectors including sports and gaming, renewable energy, hi tech, tourism, and infrastructure. Although the SWFs have different approaches, they are investing in line with their mandates and their governments’ reform agendas. Their investments matter for their local economies. The success of their investments will be key for the long-term economic, social and political prospects of the Gulf countries. To understand what is driving their latest upsurge in investments, in this commentary, we take a look at how much the assets of the largest Gulf SWFs have grown, which sectors these funds have been investing in lately, and how they are contributing to the development of their domestic economies.
• With the latest oil and gas windfall, the assets of the top seven SWFs in the Gulf have increased by about 70% since 2018, boosting their financial firepower.
• The Gulf SWFs are increasing their investments aiming to support diversification, with some also aiming to attract investment into their countries.
• The investments of the Gulf SWFs are key for the development of their local economies. Whether they prove successful remains to be seen.
“To make sense of the recent investments of the sovereign wealth funds in the Gulf, we should look at their mandates and how they are contributing to the reform agendas of their governments,” said Adriana Alvarado, Senior Vice President in the Global Sovereign Ratings Group. “The SWFs need to invest their wealth wisely. Their investments will have considerable implications for the long-term prospects of the Gulf states.”