Investors worldwide monitoring the share prices are often informed that the price of shares of a particular company has increased because the sovereign wealth fund (SWF) of a particular country has invested in it. Usually, the SWF of the gulf countries like Kuwait, UAE, Saudi Arabia is the major investors in high profile brands and companies. Hence investors, as well as others, would like to find out How Wealth Funds Became So Prominent In The Gulf Cooperation Council (GCC), how and why they are influential in the stock markets worldwide, investing large amounts of money
The government in every country provides a large number of services to citizens and also has to pay salaries to the employees, pensions, and other benefits for retired employees. In most countries, taxpayers are funding the government budget. However, the gulf countries in the Middle East are rich in natural resources like crude oil and natural gas, the government is making enough money from the sale of natural resources to pay all the government expenses. Hence citizens are not expected to pay taxes. Yet the prices of oil and natural gas will fluctuate considerably and the price of crude dipped to $10 per barrel.
So to ensure that the government has enough funds to pay its expenses, the wealth funds were started. The Saudi Arabian Monetary Agency (SAMA) was one of the first SWFs formed by a gulf country and is closely linked to the government of the country. The investment strategy of SAMA has evolved over a period of time. Initially, it was extremely conservative in its investment, only investing in fixed deposits of banks in countries with high-interest rates. Later it diversified its investment to include oil companies and in different currencies like the Japanese Yen, German Mark, and US dollar.
Other GCC countries also started their own SWF to maximize the returns on their investment. In addition to protecting the local economy from fluctuations in the prices of crude oil, natural gas, the rate of return for foreign exchange investments will also be increased. The countries are aware that the supply of oil and natural gas in the country is limited. Hence they wish to invest the surplus funds they have at present to get the best possible returns, so that the future generations in the country will have enough assets to lead a comfortable life, without oil.
The Abu Dhabi Investment Authority (ADIA) is widely regarded as the largest SWF in the GCC. The Kuwait Investment Authority (KIA) and the Qatar Investment Authority (QIA) are the other major SWFs in the Gulf. Compared to the SAMA which has a conservative approach to investment and avoids investing in real estate, ADIA and KIA are also investing in real estate. So while the 2008-2009 global financial crisis did not affect SAMA, the value of ADIA, KIA reduced to a great extent. The QIA is also diversified in its investment, preferring to invest in Europe, the USA, the middle east in some of the top global brands, financial services companies, real estate, and other options.
Mudar had finished his degree in business with major in economics. He travels around to discover different places and to also see and study them up close.