Middle Eastern Sovereign Wealth Funds Went Big for America in 2020
Posted on 01/19/2021
In most cases, global SWFs have always taken a liking to parking mounds of capital in the United States; however, Gulf sovereign wealth funds have varied their direct investments over time periods. Despite prolonged low oil prices and coronavirus lockdowns, Middle Eastern sovereign wealth funds have found tremendous opportunity in the United States time and time again. Excluding countries like Iran and Turkey, Middle Eastern sovereign investors have allocated tons of capital to U.S. money managers, participated in urban real estate developments, and co-invested in deals taking U.S. companies private. 2020 recorded the largest direct investments by Middle Eastern sovereign funds in the United States. This study ignores fixed income purchases and fund commitments.
In 2020, Middle Eastern sovereign wealth funds directly invested US$ 14.724 billion in the U.S. versus US$ 6.479 billion in 2019 and US$ 6.18 billion in 2018.
Source: SWFI.com. Global Asset Owner Database. Fund commitments excluded and Treasury and generic fixed income purchases.
Saudi Arabia’s Public Investment Fund (PIF) led the American investment charge in recent years. PIF made sizable bets, scooping up discounted U.S. and European blue chip equities when the coronavirus hit hard and earning profits when share prices rebounded. The Abu Dhabi Investment Authority (ADIA) and Qatar Investment Authority (QIA) fluctuated in their direct U.S. investments throughout the decade, especially after getting the sour taste of bailing out too-big-to-fail banks during the global financial crisis. ADIA and the Kuwait Investment Authority (KIA) allocated significant amounts of capital to third-party investors, opting for direct investments in real estate, infrastructure, and select private equity opportunities. The United States has several major human capital advantages compared to the largest developed economies and China. These advantages include demographics, education, and labor productivity.
Financial sector direct investments never fully recovered since the global financial crisis as a winning percentage of total direct investments in the U.S. by GCC sovereign wealth funds.
Even in adverse oil market scenarios, the large GCC sovereign funds see the U.S. as a favored destination, while deciding to cherry-pick among the European nations.