GCC wealth funds are new bankers to the world: Here’s why

GCC state-owned investors, including sovereign wealth funds and public pension funds, deployed a record $83bn of fresh capital in 2022, bankrolling some of the world’s biggest rescue packages, investments and acquisitions. This trend is expected to continue in 2023.

The sovereign funds from Saudi Arabia, Qatar and the UAE appear to have become go-to investors in difficult times for the global economy and markets, thanks to the surge in oil revenues.

Global SWF said five of the world’s 10 biggest spending wealth funds in 2022 were from the GCC and they invested an estimated $74bn on aggregate.

The UAE accounted for 62 per cent of total capital deployed in 2022, through ADIA, Mubadala and ADQ, Saudi Arabia’s Public Investment Fund (PIF) 28 per cent and Qatar Investment Authority (QIA) with 10 per cent.

S&P Global Market Intelligence projected that real fixed investment in the GCC grew by 15.9 per cent last year. Yet vast pools of GCC capital remain untapped as oil revenues are set to continue expanding albeit at a slower pace in the medium term (+4.4 per cent in 2023 and +5.1 per cent in 2024).

GCC sovereign funds are using part of the additional inflows to make strategic investments in advanced economies, including the US and Europe. However, state investors do not rely solely on government-transferred oil and gas receipts but are also the most active sellers of holdings.

GCC wealth fund’s foray into global markets

Sovereign wealth funds in the GCC are reshaping their strategies, emphasizing supporting local economies or wealth creation for future generations.

The wealth funds have also become more tactical – using their wealth to claim a bigger role on the world stage, diversify their economies and win geopolitical influence.

ADIA

ADIA acquired a stake in Adani Enterprises’ $2.5bn secondary share offering in January. ADIA and Swedish fund EQT agreed to acquire UK-based veterinary drugmaker Dechra Pharmaceuticals for $5.6bn – a deal that the Abu Dhabi-state investor a 26 per cent stake while EQT holds the remaining 74 per cent stake.

Last month, ADIA joined a consortium of investors to buy a portfolio of 27 Japanese hotels from Daiwa House Industry for $900m, amid a continued recovery of global tourism activity from the COVID-19 pandemic downturn phase. ADIA also acquired additional shares in China’s Zijin Mining and appeared in the top 10 shareholders list of China Shenhua Energy in 2022, among other investments.

PIF

Meanwhile, Saudi Arabia’s PIF has made several investments in the gaming industry in the past few months, by acquiring stakes in Japan’s Nintendo to become its largest foreign shareholder, Chinese e-sports company VSPO and US-based Scopely in a $4.9bn takeover deal.

The fund plans to inject capital into the newly agreed-to golf company aiming to unify the game of golf. Under the deal, PIF plans to merge the PGA Tour, DP World Tour, and Saudi Arabia-backed LIV Golf.

PIF-backed Lucid Motors also said in June that the state investor agreed to inject a further $1.8bn in a private placement. In May, the wealth fund said it was setting up the Saudi-Iraqi Investment Company with $3bn in capital. The new company will invest in infrastructure, mining, agriculture, real estate, and financial services, among others.

The Saudi wealth fund also signed an MoU in July 2023 with the Oman Investment Authority to expand cooperation and investment between the two wealth funds and enable new investments in the sultanate’s economy.

 

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Other GCC wealth funds 

Abu Dhabi’s Mubadala said it is considering buying a majority stake in US-based Fortress Investment Group, a credit and asset investor, from SoftBank Group in May.

In April, Mubadala became an anchor investor in a $630m listing of India-based Cube Highways Trust, an infrastructure investment trust, along with a Canadian pension investment manager.

Elsewhere in the Gulf region, Bahrain’s Mumtalakat acquired an additional stake in carmaker McLaren from PIF and Ares Management for $510m in June 2023.

Qatar, the UAE, and Saudi Arabia have been closely eyeing Egypt’s asset sale program. Turkey is also looking to raise funds to help meet its external financing needs.

GCC wealth funds’ assets under management (AuM) grew by 20 per cent on average in the past couple of years to reach a record $4tn today, accounting for approximately 37 per cent of global sovereign funds’ AuM, according to the latest data from Global SWF.

Read: How GCC wealth funds are fuelling growth and prosperity