Page 103 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

CHAPTER 2 Entrusted Stewards 87

states of the GCC. In line with their core mission of preserving and
growing national wealth, the conservative, OECD-focused portfolio
strategies of these SWFs are likely to continue. Increased international
scrutiny is likely to be another reason for these SWFs to concentrate
on sovereign debt, fixed income, and diversified equity investments,
with minor stakes in listed companies.
Specialist government investment vehicles are likely to become
increasingly important as GCC states pursue economic strategies of
diversification and skill building. Specialist GIVs are starting to show
signs of success in building ties with world-class companies, building
assets of strategic importance, and fostering an active investment
strategy for a portion of the Gulf states’ surplus wealth. In the years
ahead, we can expect to see expansion in the specialist GIV category,
and also greater coordination among GIVs (especially in the UAE).
Partnerships and co-investment relationships between specialist
GIVs and private investors may take root, meeting the investment
objectives of both groups and (more important) a broader goal of
enhancing private-sector involvement in the region’s capital forma-
tion and deployment.
Private institutions will evolve with the Gulf economies and
with the demographic shifts in the region. Increased focus and insti-
tutionalization are major trends that are already underway and are
expected to continue strongly. Shifts in the operating models of pri-
vate institutions are likely to create significant opportunities for
investment firms seeking portfolio companies, firms seeking to raise
Gulf capital, advisors who serve them both, and professionals seeking
opportunities in the region.
Investment houses stand poised to benefit from enhanced capital
markets, ongoing deregulation, and evolving business structures in
the region. As investment houses further prove themselves and their
capabilities, deeper relationships can be built with the private
investors who fund them and, interestingly, with the specialist GIVs
that are taking root in the region. Decision makers are likely to
encourage greater collaboration as they seek to ensure that public
investors do not “crowd out” the private sector.
While the future topography of the Gulf’s investor landscape
cannot be precisely predicted, key forces that are at play and are likely
to shape the future have been identified. Considering the ongoing
importance of the GCC to global markets, financial professionals will
be well served by keeping an eye on the moving parts creating the
dynamism of the Gulf’s institutional landscape.