Gulf SWFs 'reticent' on investments amid global crisis

Gulf sovereign wealth funds (SWFs) will channel their investments in a "systematic" and "professional" way in future following their exposure to the financial turmoil, the managing director of a US asset management firm said.

“This outside shock will enable them to take a view to build their investment capability in a very professional and systematic way, that’s a change that will be positive in the long run for these SWFs,” said Johannes Huth, managing director, Kohlberg Kravis Roberts (KKR).

The state-backed investment vehicles were “very reticent” about making future investments against the backdrop of the current financial crisis, according to Mark Patterson, chairman of US private equity firm Matlin Patterson Global Advisers.

“At the minimum, they are slowing down the rate at which they make decisions about deploying capital,” he said at the Qatar Global Investment Forum on Tuesday.

A slump in global markets and a decline in asset prices since last year has forced a rethink in the investment strategies of SWFs, which have played a central role in the move by hydrocarbon-rich GCC states to diversify their economies.

Since the crisis hit, many SWFs had turned closer to home to shore up local markets destablised by the downturn, said Shahzad Shahbaz, CEO of QInvest, a Qatar investment firm.

But the vehicles were starting to eye opportunities emerging across a range of asset classes, according to Shahbaz.

“SWFs, although they have somewhat reduced liquidity, are looking at the full range of asset classes as to where they are putting their money to work,” he said.

Qatar Investment Authority (QIA) said in March it would put buying on hold for six months before focusing on energy and commodities.

Mubadala, one of Abu Dhabi’s investment vehicles, in April released its first annual report which showed that it made losses of AED11.8bn ($3.2bn) in 2008.