Jan. 24 (Bloomberg) -- Kuwait Investment Authority, which manages an estimated $250 billion for the Gulf state, said it may buy stakes in European financial companies as they seek to replenish capital eroded by mortgage losses.

``We are interested if we are invited'' to invest as a means to diversify the fund's global holdings, KIA Managing Director Bader al-Saad told reporters today at the World Economic Forum in Davos, Switzerland.

The KIA has ``not yet'' made any such investments and hasn't been approached to commit capital to the U.K. lender Northern Rock Plc, al-Saad said.

Fueled by record oil prices and rising currency reserves, state-managed funds in countries including Kuwait, Abu Dhabi and Korea have ballooned to $3.2 trillion in assets. Those assets may rise fourfold to $12 trillion by 2015 and to $28 trillion by 2022, more than double the size of the U.S. economy, Morgan Stanley says.

The KIA on Jan. 15 said it invested $3 billion in Citigroup Inc. and $2 billion in Merrill Lynch & Co. as Wall Street banks seek to shore up balance sheets battered by more than $100 billion of writedowns from the declining value of mortgage-related assets.

`Bigger Role'

Gulf nations ``are looking to play a bigger role in the global economy with high oil prices,'' Laura James, a Middle East analyst at the Economist Intelligence Unit, said in a telephone interview today from London. ``They are starting to feel their strengths.''

Stakes in European finance companies would follow investments from neighboring Dubai, the second-biggest sheikhdom in the United Arab Emirates. State-owned Istithmar PJSC took a $1 billion holding in London-based bank Standard Chartered Plc in 2006 and DIFC Investments bought 2.2 percent of Deutsche Bank AG last year.

In May, Dubai International Capital LLC said it acquired a ``substantial stake'' in HSBC Holdings Plc after the U.K. bank's shares fell 8.4 percent in six months.

Gulf investors almost doubled their overseas acquisitions to $64 billion last year as oil prices rose past $90 a barrel, helping the region's governments earn more than $1.3 billion a day from crude sales.

Kuwait's fund is the biggest shareholder in Daimler AG and owns shares in BP Plc and Industrial & Commercial Bank of China Ltd, data compiled by Bloomberg show.

`Investment Opportunities'

It seeks ``pure investment opportunities'' without political motives that offer potential to grow Kuwait's oil profits, al-Saad said today. The fund sees more opportunities in the ``financial and real estate sector,'' he said, declining to be more specific.

Northern Rock, Britain's fourth-largest mortgage lender, sought emergency funding from the Bank of England last year after a surge in credit costs left it short of funds. The U.K. government said this week it hopes to attract a buyer for Northern Rock by Feb. 4 by offering guarantee bonds backed by the bank's home loans.

UBS AG, Europe's biggest bank by assets, on Jan. 11 said 2008 will probably be another ``difficult'' year for the financial services industry as the subprime crisis continues to curb investors' risk appetite. The Zurich-based bank in December said it will raise $11.5 billion by selling convertible bonds to the government of Singapore and a Mideast investor it didn't identify.

To contact the reporter on this story: Will McSheehy in Davos, Switzerland, at wmcsheehy@bloomberg.netGlen Carey in Dubai at gcarey8@bloomberg.net

Last Updated: January 24, 2008 09:45 EST