SWFs boost direct investments in H2 2009

Strong oil prices help global SWFs invest $67.8bn.

Global sovereign wealth funds (SWFs) more than doubled their direct investments in the second half of 2009 as they were apparently buoyed by post-crisis recovery and strong oil prices.

Figures by the US-based SWF Institute showed the Abu Dhabi Investment Authority (Adia) and SWFs in the Middle East and other countries pumped $67.8 billion (Dh249bn) in direct investment into international markets in the second half of 2009.

The investments are more than double those channelled by the SWFs in the first half of 2009, estimated at $25bn.

A breakdown showed the investments stood at $11.4bn in the first quarter of 2009, nearly $13.6bn in the second quarter and $33.9bn each in the third and fourth quarters.

The figures meant that total SWF direct investments in 2009 stood at $92.8bn, far higher than the $69.9bn channelled by the SWFs through 2008, according to the report. SWF direct investments had picked in late 2007 and early 2008 to reach around $29.2bn in the first quarter of 2008 before they started to recede to reach $18.8bn in the second quarter. They dipped to one of their lowest levels of about $8.1bn in the third quarter of 2008, when the global fiscal crisis erupted.

The SWF Institute gave no reasons for the sharp fluctuations in those investments but analysts said they believed they have to do with the global economic recovery and changes in crude prices.

Nearly 44 per cent of the world's SWF assets are controlled by Middle East funds, mostly Adia, the Kuwaiti and Qatari investment authorities and the Saudi Arabian Monetary Agency (Sama).

Previous data have shown Gulf SWF activity is closely associated with oil exports as they account for the bulk of the region's income.

Oil prices averaged around $45 in the first half of 2009 before they climbed to nearly $65 in the second half.

According to the Washington-based Institute of International Finance (IIF), strong oil prices and post-crisis recovery of global markets boosted Adia's assets by nearly $50bn in 2009 and the wealth is projected to swell further by $30bn this year.

The rebound in the assets of Adia, ranked the world's largest SWF, follows a loss of around $45bn during 2008 because of the global financial distress.

Figures by Sama, a semi-SWF institution which also acts as Saudi Arabia's central bank, showed the improvement in oil prices boosted its assets from SR1,492bn (Dh1461bn) at the end of July last year to nearly SR1,570bn at the end of the year. By the end of April, they climbed to SR1,605bn after oil prices swelled to nearly $80.

The SWF Institute put the total wealth controlled by Adia and similar funds in other countries at around $3.5 trillion at the end of 2009.

Around 47 per cent of those resources are invested in listed equity and 14 per cent in unlisted equity. The funds also included 14 per cent in real estate, nine per cent in infrastructure, nine per cent in convertibles and two per cent in fixed income, according to the report.


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