While Gulf sovereign wealth funds, now estimated to be more than $ 1.5 trillion, have been dramatically on the rise in the past few years on the back of record oil revenues, there has been a surge in the size of SWFs held by China, Norway, Russia, and Singapore.
According to IMF, SWFs held by the six GCC countries are forecast to reach $ 3 trillion by 2010 — almost double the current size and accounting for around 50 per cent of the total global SWFs— if current oil prices prevail.
"The figure is significant but not huge when compared with total market capitalisation of bonds and stocks listed on world markets of more than $ 100 trillion," IMF said.
The Washington-based organisation said the future of the Gulf region will depend as much on managing the financial assets they have as it does on producing oil and gas. Governments are entrusted to optimise the returns on national wealth in order to preserve sustainable income for future generations.
"So far, SWFs have been passive financial investors, pursuing buy and hold strategies with no short positions and with little or no borrowing. They have been sought after by companies in need to raise capital efficiently and in large amounts."
Recently, IMF’s Executive Board gave the green light for further analysis on the role of SWFs in the global economy and endorsed a proposal for the IMF to work with SWFs and other relevant parties to prepare a set of best practices for the state investment institutions.
