Page 71 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

CHAPTER 2 Entrusted Stewards 55

sense of mission is perhaps best captured by the name of a key
Kuwaiti sovereign investment vehicle: the KIA’s Future Generations
Fund. The fund was born from the recognition that the current gener-
ations have been fortunate to enjoy windfall wealth and dramatic
prosperity. Today’s leaders, therefore, bear a responsibility to provide
future Kuwaitis with a standard of living similar to that enjoyed by
nationals today. Wealth preservation is thus an overarching objective
of the fund, as is growing the wealth to serve the growing population.
Although the term sovereign wealth fund has gained global recog-
nition and widespread use, in some ways it is a misnomer. We would,
therefore, suggest a different term that better captures the ethos of
such entities (especially in the Gulf): national trusts. The term fund,
especially in the principal investments industry, often has a specific
meaning and implies characteristics that simply don’t apply to the
GCC’s sovereign investors.
Table 2.3 illustrates some of the salient differences between the
“national trust” mindset and the typical attributes of investment
funds.
The distinctions described in Table 2.3 are fundamental and have
a profound impact on the behavior of these national trusts. Because
these trusts are open-ended and take a long-term perspective, they
are not subject to the same set of pressures as funds that have defined
exit horizons. A typical private equity fund, for example, will have a

T ABLE 2.3
Gulf SWFs Are Better Described as National Trusts

Attribute National Trust Mindset Typical Investment Fund
Investment horizon Open-ended and Defined fund life with short-
long-term and medium-term targets
Strategies Multiple and evolving Defined strategy, stated
investment strategies at inception
Ownership Single owner—the Multiple shareholders/
government investors.
Beneficiaries The nation overall and Private shareholders and
future generations diverse constituencies of
institutional investors
Management Multiple external Actively managed through
managers with internal a single investment team
portfolio executives