Gulf states are becoming more adventurous investors
A DECADE AGO, few people in Silicon Valley had heard of Uber or the Public Investment Fund (PIF). The former had not provided its first ride. The latter, a Saudi sovereign-wealth fund, was a small entity with investments in local industry. But when the ride-sharing firm went public in May the PIF was among its five largest shareholders. It had bought a 5% stake in 2016 when Uber was valued at $49 per share. It started trading at $42. On paper, Saudi Arabia took a $200m loss.
The world’s sovereign-wealth funds control $8trn in assets. More than a quarter of that is held by four Gulf countries: Kuwait, Qatar, Saudi Arabia and the United Arab Emirates (UAE). In decades past this was a dull business. The Saudi central bank parked the nation’s oil wealth in Treasury bonds and other low-risk, low-return assets. Kuwait had one of the first stand-alone sovereign-wealth funds. It too invested in bonds and blue-chip companies.
No longer. All six Gulf sovereign-wealth funds are growing more adventurous. A few act like venture capitalists. Others use their billions to cement political alliances. The rest are trying to give a leg-up to local businesses and industries.
Gulf economies need to modernise and diversify away from oil and gas. Saudi Arabia, especially, needs to create good jobs for its swelling number of...