Saudi details first sovereign wealth fund

Saudi Arabia plans to launch its first sovereign wealth fund (SWF) with around $6 billion to invest in foreign companies, vice governor of the Saudi Arabian Monetary Agency (Sama) said on Wednesday.

"The Ministry of Finance is looking into a new fund," Muhammad Al-Jasser told newswire Bloomberg on the sidelines of the World Economic Forum (WEF) in Switzerland.

“It will probably mostly invest in equities,” he added.

Al-Jasser said the kingdom would begin its venture into the SWF market slowly to avoid any backlash in places such as the US and parts of Europe, where there are concerns over the transparency and accountability of state-owned funds.

"There's too much populist bias now against emerging market sovereign wealth funds,'' he told the newswire.

Al-Jasser said the Ministry of Finance’s Public Investment Fund would probably manage the fund.

The figure of $6 billion is a merge fraction of the $900 billion the UK's Financial Times reported Saudi Arabia's debut wealth fund would be worth.

The newspaper said in December the kingdom was planning to set up the world's biggest SWF, overtaking the current title-holder the Abu Dhabi Investment Authority, which has assets estimated to be worth $875 billion.

SWFs are run by countries with large current account surpluses, notably in Asia and the Gulf, and designed to manage national wealth more actively.

The top SWFs now hold around $2.5 trillion in assets and the total size is expected to reach $12 trillion by 2015 - almost 10% of all financial sets in the world.

International concerns have centred on fears that the rapidly growing funds will allow foreign governments to gain control over key industries.

However, those concerns have not stopped major financial institutions in places like the US and Switzerland from turning to SWFs for extra capital in the wake of the subprime mortgage crisis.

State-run Kuwait Investment Authority (KIA) last week agreed to invest $5 billion in Citigroup and Merrill Lynch & Company, both of which are struggling to cope with billions of dollars in writedowns from the subprime crisis.

At the same time Saudi Prince Alwaleed bin Talal revealed he was also among investors helping Citigroup, which this month posted its first quarterly loss since its creation in 1998.

The pair join the Abu Dhabi Investment Authority, which agreed in November to buy $7.5 billion of stock in Citigroup.

Saudi investors were among those that agreed to buy a stake in UBS AG, the Financial Times reported last month, after the Swiss bank said it plans to sell a mandatory convertible bond for 13 billion Swiss francs ($11.97 billion) to two investors, including the Government of Singapore Investment Corporation.

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