Kuwait’s $124bn pension fund plans infrastructure boost

Kuwait’s $124bn pension fund, which posted a record first-half profit, plans to double its infrastructure investment and boost exposure to private equity, its director general said.

The new plan, developed with US-based consultancy Mercer, will start next year and will “entail increasing infrastructure from 5 per cent to 10 per cent as well as fine tuning some of the other allocations,” Meshal Al-Othman, who heads the Public Institution for Social Security, said in an interview with Bloomberg TV on Wednesday.

The fund is looking to raise private equity’s weight to 13 per cent of its portfolio from 10 per cent, while lowering its allocation for equities to 22 per cent from 27 per cent, he said. Its cash currently accounts for 10 per cent of the total, and the plan is to reduce it to 4 per cent by March.

“We started off with a very high cash cushion, we still have a huge cushion,” he said.

The fund, which owns a quarter of US private equity firm Stone Point Capital, posted a 362 per cent surge in first half profit to $12.1bn. A new management team was brought into the fund in 2017 to transform the state-owned institution after its former head was found guilty of personally profiting from the organisation over decades.

PIFSS, as the fund is known, also owns 25 per cent of Oak Hill Advisors and 10 per cent of TowerBrook Capital Partners. It is continuing a turnaround after cleaning up its portfolio to the tune of $20bn and implementing a “precise and highly ambitious strategic allocation plan,” which took its cash down from 42 per cent, Al-Othman said.

The fund, which is focused on developed markets, namely North America and Western Europe, sees plenty opportunities in infrastructure over the next few years especially in the US where it “needs a lot of work.”

PIFSS is focused on the long term and looks at balance sheets, not necessarily stock charts, Al-Othman said.