Regional funds keep local focus

The riches of GCC sovereign wealth funds are increasingly being put to work at home rather than abroad, according to a KPMG report.

The riches of GCC sovereign wealth funds are increasingly being put to work at home rather than abroad as opportunities for international returns remain scant, according to a report by KPMG.

One of the exceptions to the trend is Qatar, which has continued to press ahead with buying assets internationally, it said.

"While the investment objectives in the region have certainly changed, including geographical and sector focus, diversification remains a key and common objective for Middle Eastern sovereign wealth funds as countries in the region seek to reduce their reliance on energy and oil and gas prices," said Vikas Papriwal, the head of sovereign wealth funds and private equity in UAE and Oman at the professional services company.

As the West struggled during the global financial crisis, the deep pockets of the region's sovereign funds snapped up an array of low-valued assets. The purchase by Abu Dhabi's Aabar Investment of a 4.9 per cent stake in UniCredit, Italy's largest bank, and Qatar Holdings' £1.5 billion (Dh8.57bn) purchase of the luxury London store Harrods in 2010 were among the eye-catching deals.

But such investments have cooled in the past year or so.

It comes as governments in Saudi Arabia, Bahrain and Qatar roll out public stimulus programmes at home under a renewed effort to raise employment, education, health care and infrastructure. As a result, more sovereign wealth is being injected back into local economies, says KPMG.

In Abu Dhabi, one of the cornerstones of the mandate of Mubadala Development, the Abu Dhabi government investment vehicle, has been to improve social development in the emirate. Reflecting the focus, it is building Cleveland Clinic Abu Dhabi and has completed four office towers at Sowwah Square.

"A number of GCC sovereign wealth funds are adopting a 'wait and see' approach to Europe as a considerable level of uncertainty continues to exist," KPMG wrote.

Published: May 10, 2013 04:00 AM


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