As Middle Eastern sovereign wealth funds emerge as the go-to investors for some of the biggest deals, the world’s oldest and one of its largest is being eclipsed by its more ambitious, flashier neighbors.
The Kuwait Investment Authority, which manages the Gulf country’s $700 billion sovereign wealth fund, has lost several senior managers, including heads of key divisions over the past year, according to people with knowledge of the matter. It’s still to appoint successors for some of those positions, they said.
The KIA invested just $2.8 billion last year, compared with $25.9 billion by the Abu Dhabi Investment Authority and $20.7 billion by Saudi Arabia’s Public Investment Fund, according to boutique adviser and data firm Global SWF. While the funds’ often-secretive transactions can be hard to track with precision, similar estimates from Javier Capapé, who specializes in sovereign entities at Spain-based IE University, confirm the trend.
The KIA’s challenges are symptomatic of a broader malaise across Kuwait, battered by five changes of government in a year. There have been a series of investigations into the fund’s investments, and people familiar with the matter described increasing interference from ministers in its decision making. While it’s still making investments, a lack of direction and fear of scrutiny by lawmakers has caused a degree of paralysis at the fund on forging deals, the people said.
“Considering the size of its balance sheet and its long history as a global investor, KIA has been losing momentum against other regional SWFs that are more stable and active,” said Diego Lopez, managing director of Global SWF. “One of the key reasons is the numerous political changes that Kuwait has gone through recently, which have affected the board and the executive leadership of both the KIA and the Public Institution for Social Security.” The PIFSS is Kuwait’s public pension fund, whose top leaders were removed last year and still haven’t been replaced.
Many of the world’s dealmakers are turning to the region’s sovereign entities, who collectively control at least $3 trillion of assets, to be a leading source of funding as others retreat. In recent months, the likes of the $700 billion PIF and $276 billion Mubadala Investment Co. have done deals in everything from aviation to tourism, sports to video games. Neither Global SWF nor IE University are aware of any deals done by the KIA this year.
KIA officials couldn’t be reached for comment. Still, people familiar with the fund’s strategy say its existing investments have been doing well and that it prefers to remain low-key and conservative. The Future Generations Fund, the wealth fund managed by the KIA, reported returns of 33% for the year ended March 2021, the most recent publicly available data. This included a 38% return from the KIA’s London arm, the Kuwait Investment Office.
Source from: Bloomberg