A recently-released joint publication from the Sovereign Wealth Fund Institute (SWFI) and Marmore Mena Intelligence examines the growing role of sovereign wealth funds (SWFs) in GCC economics.
Sovereign wealth funds, like the Saudi Arabia Public Investment Fund (PIF), are growing in importance in GCC economies as they press ahead with economic diversification efforts and reduce their reliance on oil.
“With the aim of reducing their dependency on hydrocarbons, diversification efforts of the GCC states have surged. As a part of these efforts, a large portion of their capital reserves collected over the years have been channeled into investments not only in their domestic economies, but also all over the world. These investment operations are carried out through sovereign wealth funds (SWFs), which have become one of the largest in the world with six out of the top twenty SWFs belonging to the GCC region,” the SWFI/Marmore joint study finds.
“Moreover, when we compare the size of these SWFs to the population of the various GCC countries, we find that the per capita fund size are significant on an international scale and the amount invested by the GCC countries can have a significant influence in their economies.”
GCC SWF assets under management have seen a compound annual growth rate of 8.3% since 2010, and appear on track to double in size around 2020, the study finds. The assets under management of the GCC Sovereign Wealth Funds grew to nearly $2.3 trillion in 2018.
For Saudi Arabia, that growth rate is one of the leaders of the pack. The Saudi PIF has seen a compound annual growth rate of 19.2% since 2010, the report finds.
The PIF’s current size is estimated in this report as $290 billion. Another organization, the Institute of International Finance (IIF), puts the figure around $300 billion and rising.
The report looks at the PIF’s investment strategy, noting that it is different from some other SWFs with its investment strategy of pursuing higher risk opportunities in technology companies, compared with traditional conservative avenues like real estate, according to the SWFI/Marmore report.