DUBAI: As Middle Eastern sovereign wealth funds (SWFs) 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 neighbours.
The Kuwait Investment Authority (KIA), which manages the Gulf country’s US$700bil (RM3.26 trillion) 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 US$2.8bil (RM13.05bil) last year, compared with US$25.9bil (RM120.69bil) by the Abu Dhabi Investment Authority and US$20.7bil (RM96.46bil) by Saudi Arabia’s Public Investment Fund (PIF), 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 specialises in sovereign entities at Spain-based IE University, confirmed 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 (PIFSS).”
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 US$3 trillion (RM13.98 trillion) of assets, to be a leading source of funding as others retreat.
In recent months, the likes of the US$700bil (RM3.26 trillion) PIF and Abu Dhabi’s US$276bil (RM1.29 trillion) 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 said its existing investments had been doing well and that it preferred 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 (KIO).
The dearth of prominent deals marked a dramatic about-turn for the fund, which was once among the region’s most active.
Until recently, the KIA was a leading global investor, with holdings in BlackRock Inc and Mercedes-Benz Group AG.
During the 2008 crisis, it bought into banks including Citigroup Inc. It had high profile successes in the past, selling its stake in Citigroup in 2009 for US$4.1bil (RM19.11bil), at a profit of more than US$1bil (RM4.66bil).
The KIO has also been a prolific investor, and participated in the US listing of private equity firm TPG Inc.
The KIA doesn’t officially disclose the value of its assets or details of its investment strategy.
Data and interviews showed that the fund’s activity had been up and down in recent years rather than totally absent, yet it remains lacklustre compared with regional rivals.
Global SWF estimates that the US$2.8bil (RM13.05bil) invested by the KIA in 2022, was up from US$100mil (RM466mil) a year earlier.
Research from IE University showed the KIA invested US$670mil (RM3.12bil) in 2021 and US$4.4bil (RM20.50bil) last year, mostly due to its participation in a US$3.6bil (RM16.78bil) deal for US ports logistics company Direct ChassisLink Inc.
That deal was done with other investors and is one of the last known major purchases it’s been publicly involved in.
For more than two years, Kuwait – well known for its deep domestic frictions and frequent elections – has gone through major political upheaval.
Its top leadership changed after Emir Sheikh Nawaf Al-Ahmed Al-Sabah succeeded his half brother, who’d been in power for decades.
Since then, there’s been a broad shake-up of major government entities. In June, the country appointed its fifth government in less than a year.
“The weaknesses of Kuwait’s economy and the political constraints on economic policymaking certainly create some negative spillovers to perceptions of the KIA,” said Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute in Washington.
“You don’t have this sense that KIA is participating in and benefitting from a virtuous cycle of economic momentum within Kuwait.”
The Kuwait Investment Board was established in London in 1953, eight years before the nation gained independence, to invest surplus oil revenue and help diversify the economy.
The board was later replaced by the KIO, and in 1982 the KIA was set up as its parent entity.
The KIA also manages the General Reserve Fund, or treasury.
The fund was thrust into the global spotlight last summer when it abruptly ousted the head of the KIO, Saleh Al-Ateeqi.
Almost a year on, Al-Ateeqi’s position hasn’t been filled, and the KIO – which mainly invests directly in public equities and fixed income – is being managed from Kuwait. — Bloomberg
