Global Growth to Influence Wealth Fund Withdrawals, ADS Says

  • SWFs are tool for governments to use as they are needed
  • Mubadala isn't changing strategy amid low oil, Al Mahmood says

Global economic growth will determine whether sovereign wealth funds withdraw further funds from global markets, according to ADS Holding LLC Chairman Mahmood Al Mahmood.

Funds are "there to act as a tool for governments when they’re needed," Al Mahmood, who is also a board member at Abu Dhabi sovereign investment fund Mubadala Development Co., said in a TV interview with Bloomberg Markets Middle East on Sunday. "Is this the end of it? It depends how the economy is whether they’ll continue operating the same way they did in the past."

Sovereign funds from Qatar to the United Arab Emirates and Russia, which amassed about $7 trillion of assets as oil soared higher than $100 a barrel, have been liquidating investments after a more than 70 percent slump in crude since 2014. During the boom, oil countries led a surge in investments in the U.S. and Europe, buying stakes in companies such as Barclays Plc as well as trophy assets including Manhattan hotels, European soccer clubs and London luxury homes.

Funds may withdraw as much as $404.3 billion from global stock markets this year if crude prices stay between $30 to $40 per barrel as oil-rich nations seek to shore up their finances, the Sovereign Wealth Fund Institute said in February. The value of listed equities held by the world’s largest wealth funds will probably drop to $2.64 trillion this year, from about $3.04 trillion at the end of 2015, the Las Vegas-based SWFI said at the time.

SWFs based in the oil-rich Persian Gulf, such as the Abu Dhabi Investment Authority and Qatar Investment Authority, are facing the most "financial distress," the report said, while Russia has also "steadily been depleting its sovereign wealth fund to finance large-scale projects, fund parts of government and attract direct investment," it said.

Mubadala hasn’t changed its strategy amid the drop in oil, said Al Mahmood, who led the internal alternative investment team at ADIA. "We’re still continuing with our plans because we don’t look at things in just one or two years. We’re planning for the future taking oil-price shocks into account."

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