Gulf Sovereign Funds Seen Shedding $300 Billion in Market Mayhem - Bloomberg

Gulf Sovereign Funds Seen Shedding $300 Billion in Market Mayhem - Bloomberg:

The Gulf region’s rainy day funds are bracing for the deluge.

On top of the collapse of oil prices and meltdown in global markets, Gulf sovereign wealth funds are channeling some of their billions back to counter the recession triggered by the coronavirus pandemic. The decline in assets could exceed $300 billion this year, according to the Institute of International Finance, the industry’s global association.

The impact will echo all the way to Wall Street, where asset managers count on capital from the funds sponsored by Abu Dhabi, Kuwait, Qatar and Saudi Arabia. Now that these countries need the cash back home, hedge funds and private-equity firms risk losing a substantial piece of business.

“These interlinked shocks - an oil supply shock and covid19 demand shock - are weakening oil revenues, a source of new capital for sovereign funds, and significantly increasing spending needs,” said Rachel Ziemba, founder of advisory firm Ziemba Insights. “These funds were already barely receiving new capital in the last few years, now there will likely be drawdowns.”