Foreign Banks, Companies Want Slice Of Gulf Wealth Fund

Companies are flocking to the Middle East to raise capital just as they did in 2008. But sovereign wealth funds (SWF) say they are being more strategic about investments, Andrew England, Simeon Kerr and Samer Al-Atrush reported for Financial Times.

Photo Insert: Mubadala of Abu Dhabi managed assets of just $15 billion in 2008.

While much of the world braces for recession, the IMF forecasts that the Middle East’s oil and gas producers are set to reap up to $ 1.3 trillion in additional revenues than had been expected over the next four years as energy prices were pushed up by Russia’s war in Ukraine.

Much of it will flow to the Gulf, home to top crude exporter Saudi Arabia and the largest liquefied natural gas (LNG) exporter Qatar.

It is a boom that is set to bolster the soft power of the region’s increasingly confident absolute monarchies, notably Saudi Crown Prince Mohammed bin Salman as he seeks to defuse criticism of his regime’s human rights record and project the kingdom as a major G20 power.

The Middle East’s sovereign wealth funds are bigger and more experienced than in 2008.

Mubadala of Abu Dhabi managed assets of just $15 billion in 2008. Abu Dhabi, the wealthy capital of the United Arab Emirates, has also consolidated funds over the past decade after two of its vehicles — Aabar and Ipic — got sucked into Malaysia’s 1MDB fraud, which became one of the world’s biggest financial scandals.

The $450-billion Qatar Investment Authority (QIA) was just three years old in 2008 and often appeared to act on impulse rather than strategy.

Yet one of the main draws for investors this time round is a fund that sat on the sidelines during the 2008 boom — Saudi Arabia’s Public Investment Fund (PIF). It has undergone a radical reinvention since Prince Mohammed took over as chair in 2015 as it has been tasked with leading Riyadh’s grandiose plans to overhaul its rentier economy.

“It’s not about the deal flow that is seeking us out. We want the deal flow that fits with our strategic ambitions,” says Khaldoon Mubarak, chief executive of Mubadala, the $284-billion Abu Dhabi SWF that has investments in more than 50 countries.

“In 2008 we reacted well, but this time our approach is more proactive and strategically deliberate.”

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