Pictet Sees Middle East Wealth-Fund Revival as Oil Price Holds

  • Wealth funds may have withdrawn up to $200 billion last year
  • Middle East investors seeking passive equity, bond funds

Sanford's Beveridge Asks If We're Stuck at $50 Oil

Pictet Asset Management SA said Middle Eastern sovereign wealth funds are starting to revive investment plans as a slump in oil prices comes to an end.

Investments by sovereign wealth funds in the region should start to increase later this year or early 2018, said Jamal Al-Naif, the head of Pictet Asset Management for the Middle East, Africa and Central Asia. The number of inquiries about new investment mandates has “increased substantially,” he said.

Sovereign wealth funds had been making redemptions from fund managers “all the way up to the end of 2016 and to a lesser degree early 2017,” Al-Naif said in an interview in Dubai. “As oil prices have stabilized and the adjustments have been made to government spending, we see much less volatility to cash flow management.”

Geneva-based Pictet experienced it’s worst year this decade last year as funds under management dropped about 25 percent, mainly because sovereign wealth funds in the Gulf Cooperation Council region withdrew funds, he said. 

Supply cuts by some members of the Organization of Petroleum Exporting Countries and its allies have helped oil prices to stabilize at about $50 a barrel after slumping to around $26 in February 2016. Lower crude prices caused sovereign wealth funds around the world to pull money out of global stock markets to help shore up government budgets. Norway’s government revealed plans to withdraw 121 billion kroner ($15 billion) from its sovereign wealth fund, the world’s largest, in July.

‘It Was Bad’

Estimates for withdrawals from sovereign wealth funds in 2016 range from $100 billion to $200 billion, Al-Naif said. “Whatever it was, it was bad for asset managers.”

The money manager -- which gets almost a third of its 175 billion Swiss francs ($181 billion) in assets from institutional investors -- offset some of the decline by focusing on institutions in Africa and Central Asia, he said. Lower oil prices have prompted governments in the Middle East to cut spending, reduce subsidies and look to raise money through selling off state assets.

With growing interest from investors in passive equity, fixed income, emerging markets, private equity and real estate funds, the Middle East is back on Pictet’s radar.

“Our aim is to increase the percentage of assets under management from institutional clients on a global level,” he said. “We strongly believe the GCC can and will play a major role in helping us achieve our goal.”

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