The world’s oldest sovereign wealth fund Kuwait Investment Authority’s total assets have ballooned to US$670 billion marking a gain of 33%, according to Bloomberg’s sources.
With at least half its investments in the US, the fund has benefitted from the surge in US public equities. However, most of the assets are in the Future Generations Fund, which cannot be touched without approval from parliament.
At the same time, it has been subject to political differences that have led to controversy over the make-up of the nine-member board, whose tenure expired in April. The appointments are part of the deadlock between the democratically elected parliament and the government, chosen by the ruling Emir.
The fund has been leaned upon by the Kuwaiti government to resolve its fiscal problems. Earlier this year, the KIA bought assets including stakes in Kuwait Finance House and telecoms company Zain, which are worth approximately US$2.0 billion and US$4.4 billion respectively. In addition, KIA now has control of the Kuwait Petroleum Corp, which has a nominal value of US$8.3 billion. The assets were transferred to the Reserve Fund for Future Generations (RFFG), a long-term savings fund intended to sustain the country’s economy when oil reserves are depleted.
The Gulf state was plunged into its financial woes by the collapse of oil prices, which are tracking well below the level deemed by the IMF as the fiscal breakeven oil price. It is also contending with mounting costs of the pandemic on its fiscal balance. Yet, Kuwaiti lawmakers have prevented the government from borrowing from international markets while at the same time opposed spending cuts. In 2021, the IMF forecasts crude prices at around US$40-50/b, which are significantly below the US$65.7/b required to breakeven – some have projected the breakeven price to be even higher.
The government is unable to dip into the RFFG without parliamentary authorization, while the General Reserve Fund (GRF) that is intended as a government treasurer is highly depleted. According to reports last year, the GRF saw massive drawn downs in the face of the pandemic with the expectation that it will soon be entirely depleted; an estimated US$15 billion of GRF money was burned through the fiscal effects of the pandemic alone, according to some estimates.