The Kuwait Investment Office (KIO), the London branch of Kuwait’s sovereign wealth fund, is gradually cutting its exposure to the United States in favour of Europe, its chief executive said yesterday.
The KIO a unit of the Kuwait Investment Authority (KIA), is boosting its investments in Europe because of the bond-buying programme in euro zone countries known as quantitative easing (QE), which is expected to flood the 19-member currency union with liquidity and inflate asset prices.
The KIA manages US$548 billion in assets and is the world’s sixth largest sovereign wealth fund, according to the Sovereign Wealth Fund Institute.
“This year we are starting to implement an overweight for the European markets and gradually decreasing our overweight to the US markets,” said Osama Al Ayoub.
“With all of this liquidity, I think that [European Central Bank president Mario] Draghi is trying to introduce to the market, assets will inflate. With the introduction of QE, there is going to be a chase in Europe for yielding assets. This is another opportunity in the capital market.”
The European Central Bank said in January it would this month launch a €1.1 trillion (Dh4.53tn) bond-buying programme to stimulate growth in the fragile euro-zone economy. The QE will involve the release into the euro-zone economy of €60bn each month until the end of next year.
The KIO also plans to double its assets under management over a 10-year period. Mr Al Ayoub declined to reveal the size of the assets the KIO manages.
“What we are targeting … is to double assets under management organically over a10-year period and this translates into a 7.3 per cent IRR [internal rate of return],” he said. “This year I think is going to be a very challenging year.”
The KIO has most of its assets in capital markets, with smaller exposures to fixed income and alternative investments, but expects to increase the share of alternative investments in the near term.
“The bulk of the assets is in capital markets, I think, mainly in equities and to a lesser extent in fixed income. Then there is a smaller percentage in alternative investments.
“In the next three to five years … I think there will be an increase in exposure to alternative investments mainly to the real part of alternative investments – infrastructure and real estate. I think within the capital exposure there is going to be more exposure to equities rather than fixed income.”
With the near-halving of oil prices, the fund also envisages opportunities in the energy space, particularly oil services companies outside the Middle East and North Africa.
dalsaadi@thenational.ae
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