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Role of sovereign wealth funds in the global economy

Gulf sovereign wealth funds among the most powerful in the world Sovereign wealth funds (SWFs) in the Middle East region have proved their influence on the international monetary and financial system. Their role was decisive in rescuing the international financial system, particularly during the 2007 financial crisis, by injecting several tens of billions into the capital of financial institutions. These measures not only helped to support financial institutions by avoiding any systemic crisis, but also helped to support the U.S. dollar.

The primary ambition of a SWF is to accumulate long-term national savings for the benefit of future generations, in particular by diversifying investments on a sectoral and geographical level. Following this logic, Gulf countries have for many years replenished their sovereign wealth funds with huge oil rents, particularly when crude oil prices were at their highest, reaching an all-time high of $143 per barrel in 2008.Over the past decade, they have grown in power, gaining considerable weight to the point of becoming major players in the global economy and forming a new class of investors. Of the $5.5 trillion held by SWFs today, nearly 40% comes from the Gulf countries. It should be noted that four of the world's top ten funds originate from the Middle East.

They alone account for 40% of the sector's global assets. Although their notoriety is relatively recent, most of them were founded several decades ago. As it is often the case, Kuwait was a pioneer, with the creation of its fund in 1953. However, it is still difficult to know precisely the extent of their financial resources, which are generally still largely underestimated. Managing most of the region's capital, their strike force is estimated at more than $2.5 trillion, three-quarters of which are held by three institutions: ADIA (Abu Dhabi), SAMA (Saudi Arabia) and KIA (Kuwait).

Recently, the number of SWFs has increased to the point where there are now several dozen. Within the same country, several funds may coexist, but with different objectives (local or sectoral development, accumulation of money to build savings for future generations, etc.) and governance methods specific to each fund. Faced with losses in the wake of the stock market collapse and the subprime crisis, Gulf SWFs have also made a significant shift in their strategies.Indeed, after investing their reserves in US Treasury bonds, in safe and liquid assets or in the jewels of European and US capitalism, Gulf SWFs have diversified their investments in more profitable assets such as private equity, infrastructure, listed shares, etc. and, for some of them, by actively contributing to local economic and industrial development, thereby accelerating the diversification process of the region's economies. They thus participate in the process of innovation and access to knowledge through strategic investments in research or education.