Global economic growth will determine whether sovereign wealth funds withdraw further funds from global markets, according to ADS Holding chairman Mahmood al-Mahmood.
Funds are “there to act as a tool for governments when they’re needed,” al-Mahmood, who is also a board member at Abu Dhabi sovereign investment fund Mubadala Development Co, said in a TV interview with Bloomberg Markets Middle East yesterday. “Is this the end of it? It depends how the economy is whether they’ll continue operating the same way they did in the past.”
Sovereign funds from Qatar to the UAE and Russia, which amassed about $7tn of assets as oil soared higher than $100 a barrel, have been liquidating investments after a more than 70% slump in crude since 2014. During the boom, oil countries led a surge in investments in the US and Europe, buying stakes in companies such as Barclays as well as trophy assets including Manhattan hotels, European soccer clubs and London luxury homes.
Funds may withdraw as much as $404.3bn from global stock markets this year if crude prices stay between $30 to $40 per barrel as oil-rich nations seek to shore up their finances, the Sovereign Wealth Fund Institute said in February. The value of listed equities held by the world’s largest wealth funds will probably drop to $2.64tn this year, from about $3.04tn at the end of 2015, the Las Vegas-based SWFI said at the time.
SWFs based in the oil-rich Gulf, such as the Abu Dhabi Investment Authority and the Qatar Investment Authority, are facing the most “financial distress,” the report said, while Russia has also “steadily been depleting its sovereign wealth fund to finance large-scale projects, fund parts of government and attract direct investment,” it said.
Mubadala hasn’t changed its strategy amid the drop in oil, said al-Mahmood, who led the internal alternative investment team at the ADIA. “We’re still continuing with our plans because we don’t look at things in just one or two years. We’re planning for the future taking oil-price shocks into account.”