Gulf sovereign wealth funds maintain investment pace despite Iran war

Gulf sovereign wealth funds have largely maintained their investment momentum despite the Iran war and resulting regional uncertainty, with most capital continuing to flow into developed markets, according to a new report by industry specialist Global SWF.

The report, published on June 1, found that sovereign investors across the six-member Gulf Co-operation Council (GCC), which collectively manage about $5.7 trillion in assets, have sustained their spending levels throughout the second quarter, The National cites. 

The continued investment activity has defied expectations that wartime uncertainty would lead to a slowdown in sovereign spending.

“These vehicles […] have shown no sign of slowdown [yet], with a stronger average pace in the past quarter, than in the five years before the start of the war,” Global SWF said.

The report found that four of the region’s most active investors — the Abu Dhabi Investment Authority (Adia), Mubadala Investment Company, L’imad and Saudi Arabia’s Public Investment Fund (PIF) — have maintained their investment pace. Qatar Investment Authority (QIA) was the only major fund to scale back activity, with Global SWF noting it had “decreased its pace, with about $2 billion shy per quarter since March 1”.

The conflict, which began on February 28 with US and Israeli strikes on Iran followed by Iranian attacks on neighbouring countries, disrupted businesses and hit travel, tourism and hospitality sectors across the region. Iran’s closure of the Strait of Hormuz also contributed to a global energy crisis and concerns over inflation and slower economic growth.

Despite those challenges, cross-border investments and long-term capital commitments have continued uninterrupted.

According to Global SWF, most Gulf sovereign wealth funds remain focused on developed markets, particularly in the United States. However, Adia and Saudi Arabia’s PIF have shown a stronger preference for emerging markets.

“The capital has continued to flow into US companies and funds, with only Adia and PIF showing a preference for China and other emerging markets,” the report said.

Since the start of the conflict, PIF has invested $6.1 billion in emerging markets, compared with $2.43 billion in developed markets. Adia allocated $3.32 billion to emerging markets and $1.58 billion to developed economies.

Mubadala invested more than $5.6 billion in developed markets and $330 million in emerging markets, while L’imad deployed $1.42 billion and $1.15 billion respectively. QIA invested $3.39 billion in developed markets and $60 million in emerging market opportunities, according to Global SWF data.

By Sabina Mammadli