The Middle Eastern Funds
The biggest and most opaque sovereign wealth funds (SWFs) reside in Middle Eastern oil-exporting countries. The oldest and largest, according to the assets under management, and the most well known are the Abu Dhabi Investment Authority (ADIA), the Saudi Arabian Monetary Agency (SAMA), and the Kuwait Investment Authority (KIA) although other countries in the region, including Qatar, Oman, Iran, Libya, and Algeria, have large SWFs.1 The speculation and rhetoric about Middle East SWFs are driven in part by their size and by a lack of information. For instance, the guesses about the size of the ADIA range from a high of $1.3 trillion to $300 billion.2 The KIA emphasizes on its website that in Law 47 of 1982 “Clause 8 prohibits generally the disclosure to the public of any information related to KIA’s work” (Kuwait Investment Authority 2010b).” Despite being the oldest and largest SWFs, they are the least-known entities. Even their history is poorly understood, with nearly every reference merely restating a widely accepted creation date with no analysis of the funds’ evolution or historical behavior.3 There can be no authoritative study of SWFs without a clear understanding of the Middle Eastern funds. They hold the largest concentration of funds by dollar amount as well as the largest number of funds in existence.
In many ways, the Middle Eastern funds are the archetypal SWFs. They are large, lack transparency, export commodities, fix their exchange rates, come from undemocratic governments, drive the global power shift, and come from states that are deemed less than friendly to Western interests. The importance of this
1 This chapter focuses on the ADIA, SAMA, and KIA, though I will also include information about the other funds.
2 Today analysts are little more than guessing about the size of the ADIA. One analyst in April 2008 pegged the ADIA at “somewhere between $600b and $700b” (Setser 2008). In January 2009 this estimate had been revised to “as low as $300 billion” and in August 2009 this number had been revised again to $360 billion, approximately half of the original estimate (Setser and Ziemba 2009a, 2009b). Even after accounting for significant market losses, this represents a significant downward shift in line with other estimates (Balding 2008).
3 The author could find no scholarly work, think tank analysis, government report, books, or papers on the history of any of the Middle East funds. All information presented here on these funds is compiled from various sources to better understand the history and current behavior of these funds.