#SaudiArabia, #Qatar, #Kuwait Wealth Funds Issue Warnings; #UAE's AI University - Bloomberg

Saudi Arabia, Qatar, Kuwait Wealth Funds Issue Warnings; UAE's AI University - Bloomberg

Many sovereign wealth funds, particularly in the oil-rich Middle East, typically operate in secrecy. The Gulf giants control over $4 trillion between them, and the slightest shifts in allocation — or even tone — have the potential to cause significant shifts to the financial landscape. Given that, public comments are typically rare, and generally fairly guarded.

This past week was a departure from that script, with the bosses of Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority and the Kuwait Investment Authority all sounding blunt warnings on specific investments that are likely to resonate with investors around the world.

The starkest note came from the recently-appointed managing director of the $1 trillion KIA. “Private equity is very troubled, I believe, especially in the large buyouts, venture capital and the rise of continuation vehicles — that’s a very worrying sign,” Sheikh Saoud Salem Al-Sabah said on a panel at the Qatar Economic Forum in Doha. “Their time is coming up.”

The KIA is among the largest wealth funds in the world, and the second-biggest in the Middle East. While there have been other warnings on the state of the private equity industry, the KIA’s take is significant as many of the top Gulf wealth funds have historically been big backers of buyout firms.

The industry has struggled to return money to investors for years, said Sheikh Saoud, and while that’s mostly been due to a lack of deals and initial public offerings, some firms were underwriting deals at valuations that they would struggle to exit. “The clock is ticking.”

That statement came days after Yasir Al Rumayyan spoke on stage at an event in Albania. Two years after it was left nursing losses from the rapid collapse of Credit Suisse, the head of Saudi Arabia’s PIF said it will no longer invest in Switzerland’s financial markets.

Middle Eastern investors were hit particularly hard by Switzerland’s abrupt decision to bypass investor votes when UBS took over Credit Suisse in a government-backed rescue at a steep discount. At the time, Saudi National Bank — whose top shareholder is the PIF — held a stake of about 10% in Credit Suisse.

“We’re not going to invest in the financial markets in Switzerland,” Al Rumayyan said. “If you change something overnight and wipe out all of your investors, this is a big red flag,” he told Noel Quinn, who recently took over as chairman of Julius Baer Group. “As the chairman of a Swiss bank as of 10 days ago, that concerns me,” Quinn said in response.

Sandwiched between these comments, was a note of caution from the QIA on private credit, which is one of the hottest asset classes right now and has drawn major interest from Middle Eastern sovereign wealth funds, including Mubadala and Abu Dhabi Investment Authority.

The Qatari wealth fund, though, looks to be taking a more cautious view.

“It’s becoming a very crowded market,” according to Mohammed Al Sowaidi, chief executive officer of the $524 billion QIA. One of the major pitfalls when investing in private credit is that it may look like a credit piece but in reality it’s more of an equity story, Al Sowaidi said. “So we’re very careful,” he said, adding that the QIA’s strategy in private credit is “to focus on fewer managers and to go with scale.”