KIA cuts investment in stocks, shifts to cash funds

The Kuwait Investment Authority managed assets worth KWD72 billion in 2007-08 financial year (AFP)

The Kuwait Investment Authority (KIA), the country's sovereign wealth fund, has reduced exposure to global stock markets since October, shifting assets instead into short-term cash funds, a government report said.

In a briefing to parliament, the government said KIA had cut the ratio of international share investments in a key fund in a bid to minimise the effect of the global financial crisis on Kuwait, the world's seventh-largest oil exporter, according to a copy of the report obtained by Reuters.

The news comes after KIA, which manages Kuwait's substantial oil-generated assets, last year burned its fingers by buying into US banks such as Citigroup and Merrill Lynch before both stocks nosedived and the latter was bought by Bank of America for a fraction of the price.

KIA, which like other sovereign wealth funds does not disclose its investment policy, had come under fire in parliament for making those investments.

According to the report listing government measures since October, KIA had cut the ratio of international shares in the key Future Generation fund, a nest egg for when Kuwait's vast oil reserves run dry.

"KIA has cut the percentage of investments in stocks listed on international markets in the Future Generation Fund; this has reflected on an increase of the percentage of liquidity invested in deposits and short-term cash instruments," the report said.

The fund managed assets worth at least 72 billion Kuwaiti dinars (Dh912bn) in the 2007-08 fiscal year to March 31, Finance Minister Mustafa Al Shamali said last year. The report did not say if and when KIA had sold or bought any stocks, saying only that among recent investments it had bought only blue chips with a low risk.

The report is part of a government briefing to parliament's financial committee on its latest packages of measures to tackle the impact of the global credit crunch. KIA last month launched on behalf of the government an investment fund worth 1.5 billion dinars to stop a slide on the local bourse, which fell 38 per cent last year.