Page 77 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

CHAPTER 2 Entrusted Stewards 61

Co-operation and Development (OECD) markets. In fact, 65 percent
of disclosed Gulf SWF transaction targets in the third quarter of 2008
were in the Middle East and North Africa (MENA) or Asia region. In
the course of 2008, visible transactions in OECD targets fell steadily,
from $37 billion in the first quarter to $8 billion in the third. 16 Gulf
sovereign wealth funds may not have seen the crisis coming, but once
it hit, they exercised heightened caution.
Also of note following the financial crisis has been a visible
increase in collaboration between SWFs in the Gulf region and
beyond. This trend had begun before the crisis, driven at that time
largely by international concerns that SWFs had grown too large and
required special regulation. After the crisis hit, the heads of SWFs
continued collaborating, but for very different reasons. Bader al-Saad,
managing director of the KIA, hosted a meeting of SWF heads in
April 2009 and noted that “the crisis places an extra pressure on our
group to have increased coordination and greater cooperation.” 17

Understated Stewards
In summary, Gulf sovereign wealth funds—or, as we have called
them, national trusts—act as understated stewards of national
wealth. Historically, they have eschewed public attention and tried to
maintain low profiles. Their equity investments in listed companies,
for example, tend to be below the limits required for public exposure
(sometimes set at 5 percent), and rarely do they seek representation
on public companies’ boards of directors. Although today there is a
trend toward greater transparency, Gulf sovereign wealth funds have
had little need (or, in fact, incentive) to publicize their wealth.
The stewardship mindset of Gulf sovereign investors shapes
their investment strategies, asset allocations, public demeanor, and
other factors. In terms of assets, these sovereign wealth funds are the
biggest single category of Gulf capital. As we turn our attention
toward other categories, we shall see a diversity of mindsets and
incentives, resulting naturally in very different behavior.

“SPECIALIST” GOVERNMENT INVESTMENT VEHICLES:
FOCUSED HYBRIDS
The second category of Gulf institutional investors is the segment that
we call specialist government investment vehicles (GIVs). Although
the asset base of this category is relatively small compared to that of