Sovereign wealth funds are redeploying their cash from glitzy investments in the West to local economies, finds a study by Invesco Middle East Asset Management.
Sovereign funds turn to home
GCC sovereign wealth funds are investing less globally than they have done at any point in the past three years, according to a study of regional wealth fund investment patterns by Invesco Middle East Asset Management.
The cash is instead being redirected into local economies as spending surges in public wages, infrastructure, health care and education, the study found.
"The story this year is that it is no longer a given that large sovereign governments are going to direct their oil revenue surpluses around the globe, pumping cash into other global economies," said Nick Tolchard, the head of the Middle East at Invesco.
As the West struggled during the global financial crisis, the deep pockets of the region's sovereign funds snapped up an array of low-valued assets. Abu Dhabi's Aabar Investments' purchase of a 4.9 per cent stake in UniCredit, Italy's largest bank, and Qatar Holding's £1.5 billion (Dh8.7bn) purchase of the luxury London store Harrods in 2010 were among the eye-catching deals.
Such investments have since thinned out.
"There will be contestable assets for fund managers in core relevant markets but with more money being deployed into the local economies, it is likely to be a much more competitive landscape as long as the unrest continues," said Mr Tolchard.
Less cash from GCC governments was being pumped into sovereign funds, the study said.
On the other hand, funding for sovereign pension funds had risen to 13 per cent this year from 8 per cent last year, it estimated.
Most GCC members have raised wages and pensions for public-sector workers this year.
Reflecting the trend, the study showed more cash was being deployed closer to home.
Last year, 54 per cent of GCC sovereign funds were invested in developed markets, with 29 per cent of exposure in North America and 19 per cent in western Europe.
This year, North America has accounted for 14 per cent of investment, with continental Europe down at 4 per cent.
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