With the Oman Investment Authority’s (OIA) portfolio reaching US$41.5 billion and representing roughly 40% of the Sultanate’s economy, the sovereign wealth fund has entered a new phase of growth targeting strategic economic diversification at home and yield-generating investment abroad.
To mark Oman National Day, on Friday the OIA announced the inauguration of 10 strategic projects across the country with a total value of more than OMR750 million (US$1.95 billion), in partnership with domestic and foreign investors. The projects are part of OIA’s National Development Portfolio, which manages more than 160 local assets and companies and represents more than two thirds of the total value according to Global SWF’s estimates. The other part of the fund’s portfolio is the Generational Portfolio, which consists of mostly foreign assets and will focus on “achieving the greatest returns for future generations” and is invested in public markets (69%) and private markets (31%) overseas.
Hisham Al-Sheedi, Director of Economic Diversification Investments at OIA, said that the projects align with Oman’s Vision 2040. The first will be Sanvira Carbon, a joint venture between TANMIA, Sanvira Industries, and United Business Trading which targets the establishment of a petroleum coke calcining facility in the Sohar Freezone. The OMR60 million plant’s output will be used in the manufacturing of aluminium with more than 70% exported.
OIA’s subsidiaries are being deployed to forge partnerships in food security (Oman Food Investment Holding Company (NITAJ)), ammonia and oil production (OQ), water supply (Oman Water & Wastewater Services Company), ship fuelling (Oman Oil Marketing Company), desalination (Oman Power and Water Procurement Company (OPWP)), and hotels and tourism (Omran Group).
Partnerships with other Gulf SWFs play a central role in its economic diversification drive. In September, Abu Dhabi’s US$157 billion state-owned investor ADQ announced it was looking at opportunities in Oman worth over US$8 billion and bolstering bilateral economic and political relations, in partnership with OIA. Joint investment collaboration in low carbon electricity generation, utilities, and metal production were all sited as target areas by officials of both organizations during visit of Abu Dhabi leader and UAE President Sheikh Mohamed Bin Zayed to Oman. The Abu Dhabi fund signed an agreement with OIA subsidiary the Oman Information, Communication and Technology Group (ITHCA) to establish a US$160 million venture capital fund to invest in high-growth tech startups in Oman.
In August, Saudi Arabia’s Public Investment Fund (PIF) invested US$300 million in Oman’s private equity infrastructure fund Rakiza. Rakiza is co-managed by OIA subsidiary Oman Infrastructure Investment Management and Equitix, and focuses on the renewables, power and water, social infrastructure, telecommunications, and transport and logistics sectors.
A high-profile Kuwaiti delegation including the Kuwait Investment Authority (KIA) visited Oman last year. During the visit, the Acting Managing Director and executive director of the General Reserve at the KIA, Bader Al-Ajeel said: “Kuwait has a great interest in exploring the new investment opportunities in the Sultanate of Oman, and search for opportunities that contribute to the Authority’s interest in attractive returns… We attach great importance to our GCC partnerships, with the aim of creating a system of strategic security cooperation in important and vital sectors such as logistics and food security.”
Some of OIA's international efforts have been pursued via JVs with other governments and SWFs, including Pakistan, Qatar (QIA), Vietnam (SCIC), Brunei (BIA), Uzbekistan (UFRD), India, China, and Spain (COFIDES). The latter has been especially active lately, with six investments in Spanish SMEs since July 2019. This month, OIA signed an agreement with Saudi Arabia’s ACWA Power to explore the feasibility of investment of up to 10% in the development, construction, and operation of the 1.1GW Suez Wind Energy project, which is valued at US$1.5 billion.
Last month, the fund announced it was looking for deals in the UK, exploiting the slump in the value of pound sterling. On the sidelines of the Future Investment Initiative in Riyadh, OIA’s director of private equity Ibrahim al-Eisri told Bloomberg, “We see opportunities in Europe in different sectors especially in technology. UK has lots of opportunities due to the falling currency.” At the same time, it participated in a Series C funding round for Ascend Elements, a US firm specializing in the recycling of lithium-ion batteries used in electric vehicles.
According to its 2021 annual review, the fund has achieved an annual average return of 10.3% since its launch. The OIA was established in June 2020 through the merger of the Oman Investment Fund and the State General Reserve Fund. The SGRF was used largely as an oil revenue stabilization mechanism and to diversify the economy away from O&G, while the OIF on the other hand was the successor of the Oman Oil Fund and invested in long-and medium-term projects at home and abroad.
The fund has increased its exposure to the real estate sector, tech, mining, transportation and logistics, as well as liquid assets such as public equity and fixed income. Nearly 62% of the portfolio is in the Sultanate, with 17% in North America, 9% in Western Europe and 5% in Asia-Pacific.
One of the key goals in 2022-26 will be privatizing and/or floating 30 of the 160 government companies it currently holds. This is in line with OIA’s efforts to attract expertise, technology, and foreign investment to the country’s strategic sectors. A good example was the sale of 49% of Oman Electricity Holding Company (NAMA) to China State Grid in December 2019 for US$1 billion.