Major sovereign governments and sovereign wealth funds (SWFs) in the Middle East are increasingly considering new private equity (PE) models for investment, according to Invesco’s just released fourth Middle East Management Study.
The Invesco report, based on 125 interviews across the GCC, found that development SWFs raised their allocation for private equity by 33% in the last 12 months, a huge jump compared to 10% in 2012. While ‘investment’ SWFs have on average allocated 13% of new assets, an increase from 9% in 2012.
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Nick Tolchard, head of Invesco Middle East commented: "We now have a much more developed understanding of these two major and very different types of SWFs in the Middle East region. Contrary to popular perceptions these vast state funds are not piling into global property and global infrastructure projects. While we might hear about one off investments, it’s the local development objectives and vital ongoing future proofing of state reserves that take centre stage."
Invesco said that the political unrest in the region had caused governments to pour more cash into pension funds as well as so-called ‘development’ SWFs, which focus their investments on assets that contribute to local economic growth.
Investment manager Invesco’s Middle East Asset Management Study said that regional state pension funds were forecast to grow assets by 19% this year, following a 16% rise in the previous year and a 9% uptick in 2011.
The report added that about 15% of all new sovereign assets in the region were going into state pension funds. In contrast, SWFs are expected to increase assets by an average of just 4%, down from 8% in 2012.
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By GlobalDataHowever, property and infrastructure, viewed by many as the alternative investments ‘of choice’ by the region’s sovereign wealth funds , are viewed as less important.
