GCC sovereign wealth funds' assets under management grow to $3.6 trillion

The figure represents about 33% of the world’s SWF assets, the largest share of any region in the world, report says

Abu Dhabi Investment Authority headquarters. Adia's estimated assets stand at $993 billion. The National

GCC sovereign wealth funds’ assets under management have grown 70 per cent since 2018 to reach $3.6 trillion, driven by an increase in oil and gas prices, and as they continue to invest actively, according to a new report.

This represents about 33 per cent of the world’s SWF assets, the largest share of any region in the world, credit rating agency DBRS Morningstar said in a report.

The largest SWF in the Gulf, in absolute terms, is the Abu Dhabi Investment Authority (Adia), with estimated assets of $993 billion (equivalent to 320 per cent of Abu Dhabi's gross domestic product), the report said, citing data by Global SWF.

Adia is also the fourth-largest SWF in the world after Norway’s Government Pension Global Fund ($1.42 trillion in assets), the China Investment Corporation ($1.35 trillion), and China's State Administration of Foreign Exchange (Safe) Investment Corporation ($1.03 trillion).

Among top SWFs in the Gulf, Adia is followed in size by the Kuwait Investment Authority, with estimated assets of $800 billion and Saudi Arabia’s Public Investment Fund, with estimated assets of $700 billion, the report said.

They are followed by Qatar Investment Authority, Investment Corporation of Dubai, Abu Dhabi's Mubadala Investment Company and the UAE capital's investment and holding company ADQ, the data showed.

"SWFs in the Middle East, particularly in the oil and gas producing Gulf countries, have benefitted notably from the latest boom in oil and gas prices. Boosted by the windfall, most of the Gulf SWFs have seen a significant increase in their assets and have been investing actively," said report authors Adriana Alvarado, senior vice president of global sovereign ratings, and Nichola James, managing director and co-head of sovereign ratings.

"Their investments matter for their local economies. The success of their investments will be key for the long-term economic, social and political prospects of the Gulf countries."

The findings are in line with research by S&P Global Market Intelligence showing that Gulf SWFs' assets under management grew 20 per cent on average in the past two years to reach about $4 trillion on higher oil prices.

This is the equivalent of about 37 per cent of global SWF assets under management, according to the data and research company's August report.

Gulf SWFs are expected to become more active and play an even bigger role in global markets this year as they receive large capital injections derived from higher oil revenue, an annual industry report by Global SWF said in January.

Of the top 10 most active sovereign investors in 2022, five were from the Gulf region, according Global SWF.

Of the Gulf SWFs, the PIF has recorded the sharpest growth in assets under management since 2018 of 135 per cent, followed by the KIA, QIA and Adia, the DBRS Morningstar report said.

"The financial firepower of the Gulf’s SWFs is thus substantial and the impressive increase in AUM in recent years has placed them in an even stronger financial position to invest than in the past," Ms Alvarado and Ms James said.

The Gulf SWFs have an overall mandate to achieve long-term returns to secure the prosperity of their economies and to implement their governments’ reform agendas, the authors said.

The Gulf SWFs have been investing in various asset classes across a range of sectors, from sports and gaming to renewable energy, high tech, tourism, retail and infrastructure.

"We foresee the SWFs to continue increasing their strategic investments and their global profiles," the authors said.

"Whether the new investments succeed in attracting long-term foreign investment to their countries and in diversifying their economies remains to be seen. The Gulf SWFs’ continuing financial diversification of their assets seems more likely."

The success of the Gulf SWFs' investments will have "considerable implications" for the long-term economic and social prospects of the Gulf countries, the report said.