Due to the average oil price of $99 per barrel and the peg of their currencies to the dollar, Middle Eastern sovereign wealth funds (SWFs), particularly in the Gulf Cooperation Council (GCC) countries, are in a much better position and are moving forward more quickly in 2023.
This results in significant surpluses for certain Gulf Cooperation Council economies with reduced fiscal expenditure, distributed to select sovereign wealth funds after the year. As a result, Global SWF predicted in its annual report that the larger, more liquid, and globally oriented savings funds, such as Abu Dhabi’s ADIA, Kuwait’s KIA, and Qatar’s QIA, would experience considerable capital inflows.
Due to their more negligible exposure to conventional bonds and stocks, strategic funds with sizable portfolios of domestic assets, such as Mumtalakat in Bahrain, ICD in Dubai, and Abu Dhabi’s Mubadala and ADQ, do not anticipate receiving significant capital infusions.
“In conclusion, the current economic situation will strengthen regional investors. Middle Eastern sovereign wealth funds are more prepared than ever to shine in this situation. Global SWF’s annual report shows that from USD 21.8 billion in 2021 to USD 51.6 billion in 2022, they invested abroad in Western economies, including the US and Europe,” Global SWF said in its annual report.
2023’s top 10 most active sovereign investors include five investors from the GCC.
SWFs’ Expansion By 2030
The estimated $10.6 trillion in sovereign wealth funds in 2022 is predicted to increase to USD 12.6 trillion by 2025 and USD 17.3 trillion by 2030. According to Global SWF, this will include an increase in AUM and any new funds created due to excessive earnings or a need for capital.
Consolidation and rising contributions will continue to benefit public pension funds, whose values are projected to increase from USD 20.8 trillion to USD 24.6 trillion by 2025 and USD 33.2 trillion by 2030, respectively.
By 2030, there will be at least 500 SOIs, and some of them, if they are successful, might become highly important and help the industry grow, according to Global SWF. Also, the Top 15 will likely still include the top four Middle Eastern funds, with Saudi Arabia’s PIF perhaps rising to the top with USD 2 trillion.