Gulf Sovereign Funds Invest Less Internationally, Invesco Says

Sovereign wealth funds in the Persian Gulf region are investing less globally than they have in three years, preferring to spend locally and increase state programs in the wake of the Arab Spring, Invesco Ltd. said.

New government financing to funds in countries such as Qatar, the United Arab Emirates and Saudi Arabia will rise 8 percent this year, down from 13 percent in 2011, even as they turn to local investments, Invesco said today in its Middle East Asset Management Study.

“Sovereign states are redirecting revenue and SWF assets from international investments back to the Middle East,” Nick Tolchard, head of Invesco Middle East, told reporters at a news conference in Dubai. “Western governments have approached SWFs from the Middle East to help with the economic recovery, but many will fight a losing battle. There is certainly less money to invest internationally, so the stakes are higher.”

Civil unrest in countries such as Egypt and Syria since early 2011 has prompted some Gulf countries to increase public spending to create jobs and develop industries. Saudi Arabia, the region’s largest economy, announced a $500 billion state-spending program for housing, transportation and education.

In 2011, 29 percent of new money from Gulf sovereign wealth funds was invested in North America, 19 percent in Western Europe and 33 percent in the Gulf. This year, allocations for North America and Europe fell to 14 percent and 4 percent, while investments in the Gulf region rose to 56 percent. Investment in local bonds increased to 14 percent this year from 6 percent in 2011, while funding for property and infrastructure are at 13 percent and 14 percent, respectively, the report said.

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