Banking & Finance

Cautious Oman’s SWF outperforms global markets

August 3, 2023, 5:44 AM

The OIA saw an 8.8% return on its 2022 public market investments
$18bn-plus fund adopted a defensive strategy due to market volatility
Its bonds, equities and other assets span 50 countries

Oman Investment Authority’s cautious approach to public market investing enabled it to significantly outperform global benchmarks last year, the sovereign fund’s annual report revealed on Wednesday.

These gains helped the OIA, which was created in June 2020 following a government reshuffling of state-owned assets, to increase its portfolio value to OMR 17.9 billion ($46.5 billion) as of December 31 2022.

The report did not provide a prior-year figure and OIA’s 2021 annual report does not specify the value of its assets at that time. Nevertheless, OIA says its portfolio provided an 8.8 percent return in 2022.

“We have achieved good returns and excellent profits by making some new investments and exiting others,” Sultan Al-Habsi, Oman’s finance minister and OIA’s chairman, said in the report.

OIA’s National Development Portfolio represents 60 percent of its total assets, while its Future Generations Fund holds the remainder.

The latter’s public portfolio spans about 50 countries globally and includes equities and bonds. Also included are what the OIA describes as short-term assets and multi-assets.

It outperformed the MSCI World Index by 10 percent, the S&P 500 by 11 percent, the Nasdaq Index by 25 percent and a global bond index by 8.5 percent, the OIA states.

“This performance was driven primarily by adopting a defensive strategy in the face of high market volatility,” the report states.

National Development Portfolio

The National Development Portfolio makes direct investments in private businesses, holding companies and Muscat-listed stocks, as well as in bonds, treasury bills and sukuk.

It holds stakes in about 160 companies that combined delivered a net profit of around OMR 1.4 billion last year.

These businesses include Oman’s state-run oil company, OQ, which in 2022 doubled its annual profit year-on-year as revenue rose 68 percent over the same period. Similarly, Oman LNG’s annual profit surged 126 percent following a 58 percent increase in revenue.

OIA did not provide further details on the financial performance of OQ or Oman LNG.

Its investments in Muscat-listed companies include stakes in former telecom monopoly Omantel and Oman Cement.

OIA said 60.5 percent of its assets are denominated in rials, 34 percent in dollars, 3 percent in euros, and 1.5 percent in British pounds.

The domestic market accounted for 61.5 percent of assets, 17.6 percent are in North America, 9.8 percent are in Europe, and 4.2 percent are in Asia Pacific.

Just 1.9 percent are in other parts of the Middle East and North Africa. This distribution was little changed from a year earlier, OIA’s 2021 report shows.

OIA-owned companies reduced their combined debts to OMR 9.12 billion in 2022 from OMR 10.44 billion in 2021. It forecasts total debt will decline to OMR 6.12 billion by the end of 2025.