Saudi Arabia is about to approve the launch of its first sovereign wealth fund with initial capital of SR20 billion ($5.3 billion), the UK's Financial Times reported on Tuesday. The fund, which will be set up by the state-controlled Public Investment Fund (PIF), will act as “a portfolio investor focusing on maximising long-term rates of return”, the newspaper said, quoting the PIF's secretary general, Mansour Al-Maiman. Al-Maiman, who said Riyadh is in the final stages of approval, said the new fund could raise its capital or increase the size of assets under management as needed. PIF is attached to the Finance Ministry and invests exclusively in local assets. Mohammed Al-Jasser, vice governor of Saudi Arabia's central bank, told newswire Reuters in January that Saudi Arabia is considering setting up a $6 billion sovereign wealth fund to invest the country's surplus oil wealth, but could “live without it” if debate about suspected abuses by similar foreign investment vehicles continues. Maiman said an increase in capital in the future has not been precluded. Some bankers outside Saudi Arabia had expected the fund to be closer to other countries' funds. Kuwait's sovereign fund is estimated at $200 billion, Qatar's $60 billion, and the Abu Dhabi Investment Authority's at $500 billion to $850 billion. News of the launch comes as a study conducted by Global Insight showed that sovereign wealth funds have been growing at a rate of 24 percent annually for the last three years and are expected to have increased to $10.5 trillion in the next five years. Gulf states need to create more sovereign wealth funds (SWFs) to take advantage of a surge in their petrodollar income and support their long-term plans to diversify their sources of income. The creation of such funds will combine with the existing SWFs in the six GCC states to strengthen their influence in global markets.
