Gulf wealth funds put investing in US well ahead of China

Reuters

• Geographical allocations vary widely
• GCC ties with China growing stronger
• ADIA invests 52% in US

Most sovereign wealth funds in the Gulf remain heavily invested in the US, while China represents a much smaller part of their portfolios, data from the consultancy Global SWF shows. 

The data also shows that the portfolios of Gulf sovereign wealth funds vary widely in terms of their geographical distribution.

This is partly a result of their differing mandates. Abu Dhabi Investment Authority, for example, only invests abroad, while ADQ and Mubadala, two other sovereign funds from the UAE’s richest emirate, own both domestic and foreign assets.

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The imbalance between US and China as destinations for SWF investment by coulntries in the GCC is despite strengthening trade and investment ties between the six-country bloc and China, the world’s biggest economy by purchasing power parity.

For example, 52 percent of ADIA’s assets are in the US, against 5 percent in China. That 5 percent is the highest relative allocation to China among Gulf SWFs.

Kuwait Investment Authority (KIA) has 33 percent of its portfolio value in the US and 2 percent in China. Saudi Arabia’s Public Investment Fund (PIF) has zero exposure to China and 14 percent to the United States.

KIA has the biggest relative proportion of its investment allocated to the rest of the world at 55 percent of its portfolio, followed by Qatar Investment Authority at 45 percent and Investment Corporation of Dubai (39 percent).

The PIF, which ultimately owns an 8 percent stake in the state oil producer Saudi Aramco, holds 73 percent of its assets domestically. Only Abu Dhabi’s ADQ has a higher relative domestic exposure, at 89 percent.

ADIA has increased its exposure to India, buying into real estate financing and investment companies as well as healthcare and retail.

Another major ADIA target has been infrastructure, which it says delivers returns that have little correlation to other asset classes. In January, the fund bought a minority stake in Indonesia’s first road toll system.

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PIF has been transformed from a relatively obscure government entity to Saudi Arabia’s flagship investment fund after the appointment of Prince Mohammed bin Salman as chairman in 2015.

Bin Salman, who subsequently became crown prince, has brought government stakes in companies such as Saudi Telecom Co and Saudi Electricity under the PIF’s control.

The fund has also bought sizable holdings in US-listed companies including Uber, FedEx, PayPal, Walmart, Starbucks, Microsoft and Amazon, as well as establishing numerous domestic companies mandated to help diversify and expand Saudi Arabia’s non-oil economy.

Qatar Investment Authority made global headlines in the 2000s and early 2010s as it acquired trophy assets in Europe and the US, such as the London department store Harrods, as well as minority stakes in storied companies including 10.5 percent of Volkswagen and 15 percent of the UK supermarket chain Sainsbury’s.

In the past few years, the QIA has adopted a lower profile approach to its acquisitions and has also made investments in Turkey, Africa and Asia. These include 10 percent of Borsa Istanbul, Turkey’s stock market.