The Arabian Peninsula is home to nearly 20 sovereign wealth funds (SWFs) managing approximately $3.7 trillion—about a third of global state fund assets. Historically, these funds were tasked with investing surplus hydrocarbon revenue to ensure the stability of domestic economies and secure prosperity for future generations after the eventual depletion of oil reserves. Today, however, their focus is shifting toward diversification.
“The main mandate is to diversify away from hydrocarbons,” says Diego López, managing director of Global SWF, a New York-based platform that analyzes over 400 SWFs and public pension funds worldwide.
Growth Amid Global Decline
In 2022, while global sovereign wealth and public pension funds saw a combined value decline of around $1.2 trillion, Middle Eastern funds grew significantly, buoyed by surging oil and gas prices. According to the SWF Institute, the largest Middle Eastern fund is the Abu Dhabi Investment Authority (ADIA), which holds $790 billion in assets, a $100 billion year-over-year (y-o-y) increase. Following closely is the Kuwait Investment Authority (KIA) with $750 billion, up $12 billion y-o-y. Saudi Arabia’s Public Investment Fund (PIF) has seen rapid growth, climbing from $230 billion in 2018 to over $600 billion today, with plans to reach $1 trillion by 2025.
Expanding Global Influence
A significant portion of this increased capital is being deployed overseas. Middle Eastern SWFs more than doubled their investments in Western markets in 2022, with total investments rising to $51.6 billion from $21.8 billion the previous year, according to Global SWF. Of the 60 megadeals (transactions worth $1 billion or more) recorded globally last year, Middle Eastern funds were involved in 26. Key deals included ADIA’s real estate ventures in the U.S., U.K., and Australia, the PIF’s acquisition of a major stake in Aston Martin and discussions to buy 25% of London Heathrow Airport, and Mubadala’s significant investments in European telecommunications.
“Middle Eastern investors are aggressively pursuing ‘cheap’ assets in Europe and the U.S., with limited competition from other international peers,” highlights Global SWF’s 2023 annual report.
This trend shows no signs of slowing. The International Monetary Fund predicts Middle Eastern and North African oil and gas producers will generate $1.3 trillion in additional revenue over the next four years. Ahmed Al-Hammadi, Qatar Investment Authority’s (QIA) chief investment officer for Europe, affirmed that “the QIA will continue to invest ambitiously in 2023 despite market uncertainties and inflation concerns.” Meanwhile, Oman’s Investment Authority has announced plans for $5 billion in investments across 65 projects this year.
Evolving Strategies
Middle Eastern SWFs gained global prominence after the 2007 financial crisis, when Western banks such as Barclays, Credit Suisse, and Citigroup sought capital injections. Initially focused on trophy assets like luxury real estate and brands, these funds have since matured, expanding into retail, financial institutions, energy, entertainment, and technology sectors.
“They have become larger, more sophisticated, and more focused on returns and growth opportunities,” says López.
Today, these funds employ over 7,000 people and have restructured operations to boost performance. Their acquisitions now prioritize returns and growth, steering away from mere prestige projects. For example, Gulf investors have funneled billions into companies like Tesla and Uber, while ADQ and Mubadala launched a $10 billion G42 Expansion Fund to support tech ventures in emerging markets.
Focus on Sustainability and Innovation
Climate change and clean energy are emerging as key areas of interest. In 2022, QIA invested $2.4 billion in Germany’s RWE, one of the world’s largest clean energy producers, and led a $250 million funding round for French biotech firm Innovafeed. Similarly, Gulf funds have taken notable stakes in the sports industry, though these moves often spark criticism of “sportswashing” and soft-power ambitions.
Domestic Transformation
At home, SWFs act as a financial buffer against economic shocks and are instrumental in driving regional transformation. For instance, Kuwait’s KIA helped stabilize the economy during the pandemic by funding civil servant salaries. In Saudi Arabia, the PIF’s reinvention under Crown Prince Mohammed bin Salman is fueling Vision 2030, the kingdom’s ambitious economic diversification plan. The PIF backs landmark projects such as Neom, a $500 billion smart city, and new ventures like Ceer, Saudi Arabia’s electric vehicle brand, and Riyadh Airlines.
Arab funds also incentivize foreign companies to establish regional hubs. In January, Abu Dhabi’s investment office supported France’s Ubisoft and Hong Kong’s Insilico Medicine in setting up regional operations. The PIF’s majority stake in U.S. electric car maker Lucid includes plans for a Saudi-based manufacturing hub, with a pledge to purchase up to 100,000 vehicles.
Balancing Power and Ambition
As energy prices remain high, Arab SWFs continue to expand their influence, potentially altering the global economic power dynamic. However, their operations often lack transparency. Decisions reflect the ambitions of the ruling elite, as evidenced by the UAE’s President Mohamed bin Zayed Al Nahyan appointing close relatives to key positions in ADIA and Mubadala.
“Every fund answers to its stakeholder, typically the ministry of finance on behalf of the government and citizens,” López notes. Yet in autocratic Gulf states, ultimate power lies with the ruler, and there are few checks and balances on SWF operations.
A Growing Force
Middle Eastern SWFs have evolved into formidable global players. By leveraging high energy revenues, they are shaping industries, fostering innovation, and asserting influence both locally and globally. Their growing financial clout and strategic investments ensure they will remain central to discussions on the future of global economics and power distribution.