Page 75 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

CHAPTER 2 Entrusted Stewards 59

classes of cash, fixed income, and listed equities in mature markets.
These allocation models give priority to the core purpose of preserving
wealth, with less emphasis on the pursuit of above-market returns
through riskier investments.
McKinsey & Co. researchers and other experts have put forth
broad estimates regarding the asset allocation models of Gulf SWFs.
Before considering these, it is important to note that the estimates
cannot be verified, since the portfolios of these SWFs are not public
information. For illustrative purposes, though, it is worthwhile to cite
the allocation estimates put into the public domain by other
researchers. Figure 2.2, based on the published work of the McKinsey
Global Institute, Monitor Group, and the Sovereign Wealth Fund
Institute, provides a useful general reference. 12
The key point that can safely be drawn from these estimates is
that the bulk of Gulf SWF assets, especially those held by the largest
institutions, are in cash, fixed income, and equities. ADIA and the
KIA are estimated to hold, respectively, only 15 percent and 6 percent
of their assets in alternative classes like private equity, hedge funds,
and real estate. Although the boldest investments by these institu-
tions are often the highest profile (for example, the KIA’s 19 percent
investment in the Industrial and Commercial Bank of China), “risky”

FIGURE 2.2

SWF Assets Are Principally Held in Traditional Asset Classes
Assets under
Management
($ billions) 875 433 203 60 14 8
0% 2% 0%
Lowest Cash 5%
Risk 20% 22% 20% 12%
Fixed Income 20% 30%
15%
36%
20%
55%
60%
Equities 60%
57%
50% 50%
25%
Highest Alternative 15% 20%
Risk Assets 6%
0%
ADIA SAMA KIA QIA Mumtalakat SGRF
(UAE) (Saudi Arabia) (Kuwait) (Qatar) (Bahrain) (Oman)
Source: Sovereign Wealth Fund Institute, 2009.