Sovereign wealth funds (SWFs) in the Gulf Cooperation Council (GCC) remain overwhelmingly focused on the United States, while China constitutes a small fraction of their investment portfolios, according to data from consultancy Global SWF. This geographic disparity persists despite growing trade and economic ties between the GCC and China, the world’s largest economy by purchasing power parity.
Diverging Mandates and Investment Focus
The geographical distribution of Gulf SWF investments varies widely, driven by the distinct mandates of each fund. The Abu Dhabi Investment Authority (ADIA), for example, invests exclusively abroad, while two other UAE funds, ADQ and Mubadala, balance both domestic and international holdings.
This divergence is evident in portfolio allocations. ADIA dedicates 52% of its assets to the US, compared to just 5% in China—the highest relative allocation to China among Gulf SWFs. Similarly, Kuwait Investment Authority (KIA) has 33% of its assets in the US and 2% in China. In stark contrast, Saudi Arabia’s Public Investment Fund (PIF) has no exposure to China and allocates 14% of its portfolio to the US.
Domestic Versus International Allocations
Domestic investment remains a significant focus for several Gulf SWFs. The PIF—which owns an 8% stake in state oil giant Saudi Aramco—holds 73% of its assets domestically. Abu Dhabi’s ADQ surpasses this with 89% of its portfolio concentrated within the UAE. Meanwhile, KIA leads in allocating investments to the rest of the world, dedicating 55% of its portfolio outside the US and China, followed by Qatar Investment Authority (QIA) at 45% and Investment Corporation of Dubai (ICD) at 39%.
Strategic Focus on Emerging Markets
Gulf funds are increasingly exploring opportunities in emerging markets. ADIA has ramped up its exposure in India, targeting sectors such as real estate financing, healthcare, and retail. Infrastructure remains a key focus for the fund due to its low correlation with other asset classes. In January, ADIA acquired a minority stake in Indonesia’s first toll road system.
The Transformation of Saudi Arabia’s PIF
The PIF has undergone a dramatic transformation since Prince Mohammed bin Salman assumed its chairmanship in 2015. Once a relatively obscure entity, the PIF has become Saudi Arabia’s flagship investment vehicle, acquiring stakes in major US-listed companies such as Uber, FedEx, PayPal, Walmart, Starbucks, Microsoft, and Amazon. The fund has also established numerous domestic companies to drive Saudi Arabia’s economic diversification beyond oil.
Qatar’s Lower Profile Approach
QIA, once known for high-profile acquisitions such as London’s Harrods and significant stakes in Volkswagen and UK supermarket chain Sainsbury’s, has shifted to a more understated strategy. Recent investments include stakes in Turkey, Africa, and Asia, such as a 10% holding in Borsa Istanbul, Turkey’s stock exchange.
A Persistent Imbalance
Despite strengthening ties between the GCC and China, the disparity in investment allocations remains stark. The enduring focus on US assets reflects both the perceived stability of the US market and the historical investment patterns of Gulf SWFs. However, as the funds continue to diversify, emerging markets may play a larger role in their portfolios.