Abu Dhabi Investment Authority tower
Sovereign Wealth Funds in six Persian Gulf countries – including Kuwait, the United Arab Emirates and Qatar – have now amassed $1.7 trillion, positioning them for attempts to control major banks and securities firms in the U.S.
The funds are ready to invest petrodollar earnings worldwide as their managers examine equity plays on businesses around the globe, Business Week reports.
Sovereign Wealth Funds in the Persian Gulf are comprised of government-controlled investment portfolios amassed largely as a result of the windfall profits from oil climbing to record highs.
Increasingly, U.S. investment bankers are traveling to the Middle East to meet what Business Week calls the “New Kings of Wall Street.” The fund managers include:
- Shiek Khalifi Bin Zayed Al Nahyan, chairman and managing director of the $875 billion asset Abu Dhabi Investment Authority that in late November invested $7.5 billion for a 4.9 percent equity stake in Citigroup.
- Bader M. Al Sa’ad is the managing director of the $213 billion asset Kuwait Investment Authority, a fund which has become the cornerstone investor in the Industrial and Commercial Bank of China, China’s largest commercial bank.
- Sheikh Hamad bin Jassim bin Jabir Al-Thani is Qatar’s prime minister and head of the Qatar Investment Authority, a $50 billion investment fund that in September bought 20 percent of the London Stock Exchange.
- Soud Ba’alawy, the executive chairman of Dubai Group, a financial conglomerate which includes the Dubai Investment Group that through Borse Dubai owns a 19.9 percent stake in Nasdaq, the second largest securities exchange in the U.S.
Among U.S. companies, including many of the largest banks and financial institutions, there are many candidates that now or soon may be more than willing to receive capital infusions from foreign sources, including Middle East Sovereign Wealth Funds.
The Wall Street Journal at the end of December published a list of U.S. companies with earning problems resulting from the sub-prime meltdown, the housing slowdown and the credit crunch experienced as the U.S. economy slowed down in the fourth quarter last year.
The Wall Street Journal list included:
- Ambac Financial Group expected a $5.4 billion pretax write-down in the fourth quarter 2007 and planned to cut its quarterly dividend by two-thirds;
- American International Group, or AIG, saw a $2.54 billion after-tax drop in the value of investments in assets that are backed at least in part by sub-prime mortgages;
- J.P. Morgan Chase reported fourth quarter 2007 net earnings fell 34 percent as it recorded $1.3 billion in markdowns on sub-prime positions and saw higher credit costs;
- Washington Mutual expected to record a fourth quarter 2007 loss on a $1.6 billion goodwill write-down on the value of its home loans business;
- Wells Fargo announced that fourth quarter net income fell 38 percent on a $1.4 billion reserve for credit losses.
- On the list were several financial institutions that have already showed up in the market exploring foreign investment capital, including Bank of America, Bear Stearns, Citigroup, Merrill Lynch and Morgan Stanley.
Equity investments by Sovereign Wealth Funds differ from traditional private or public investment in that the equity purchased is not owned by a private investor or public holder of listed common stock but by a foreign government that owns the stock as a government entity.
Foreign investments in U.S. companies are subject to approval from the Committee on Foreign Investment in the United States, or CIFUS, organized within the U.S. Treasury.
As WND reported, a national outrage broke out in 2006 when a Dubai company, Dubai Ports World, proposed to take over operation of some 22 U.S. ports, as part of an acquisition involving the London-based Peninsular & Oriental Steam Navigation.
In the closing months of last year, foreign investments announced to help major U.S. banks and financial institutions received, by comparison, almost no public outcry. Many believe that’s largely because the infusion of foreign capital was perceived by the public as necessary as troubled U.S. financial institutions scrambled to find capital required to continue operations under asset and reserve requirements.