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Sovereign Wealth Funds Target Alternative Investments

Sovereign Wealth Funds Target Alternative Investments

Wednesday, 30 October, 2019 - 11:30
A sign of the Future Investment Initiative is seen during the investment conference in Riyadh, Saudi Arabia October 23, 2018. Reuters/Faisal Al Nasser

World sovereign funds officials, who participated in the Future Investment Initiative (FII) in Riyadh, said that funds were seeking to diversify their investments to distribute the risks.

They stressed that the transition to alternative investments would constitute a large part of the investment portfolios in sovereign funds, underlining a trend to hold partnerships with family businesses.

Khalid Al-Rumaihi, chief executive of Bahrain's Mumtalakat Holding Company, said that sovereign wealth funds varied through their operations, as they were strategic assets of the state and operated like private equity firms.

Al-Rumaihi noted that he expected the company’s investments in alternative investments to increase to 30 percent by 2031.

“As long as the source is good for investment, sovereign funds tend to work together in this direction,” he said.

The shifts of SWF investments from one sector to another are “natural, in line with the global developments in the economies and structural transitions in the fourth industrial revolution, according to Mumtalakat chief executive.

Farouk Bastaki, Managing Director of the Kuwait Investment Authority, said that the heads of sovereign funds around the world were not worried about the fluctuation of liquidity.

He pointed out that the diversity of investments adopted by sovereign funds “gives impetus to the distribution of risks, and strengthens sectors that were marginalized.”

Heenam Choi, chairman and chief executive officer of Korea Investment Corporation, said his country was currently seeking to increase the focus on alternative investments, from 16 percent to 20 percent by 2021.

Participants in the FII conference explained that sovereign funds have significant investments in commodities and technology companies.

They noted that one of the highlights of future investment was the partnerships between sovereign funds and family businesses in the coming years.

They also stressed the importance of balancing the investments of sovereign funds between domestic and foreign investment.

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