New York, Davos, Dubai: Kuwait Investment Authority is planning to manage more of its own assets as the world’s fifth-largest sovereign wealth fund seeks to take more risk to boost returns.
The KIA, as the fund is known, wants to increase the allocation of funds managed in-house to as much as 8 per cent from 1 or 2 per cent at present, Managing Director Bader Al Sa’ad said in an interview with Bloomberg Television on Wednesday at the World Economic Forum in Davos, Switzerland.
The KIA has $592 billion (Dh2.17 trillion) of assets, according to the Sovereign Wealth Fund Institute — meaning $35 billion could be withdrawn from external managers.
“Why do I have to pay extra fees for less return?” he said. The shift translates into “a big lump sum but it’s small compared to the core portfolio,” Al Sa’ad said.
The KIA joins other wealth funds and institutional investors seeking to manage more assets internally.
The California Public Employees’ Retirement System (Calpers), the largest US pension, said last week it was developing plans to shift as much as $30 billion from external to internal managers.
The Abu Dhabi Investment Authority (ADIA), the world’s second-biggest wealth fund, is investing in areas such as real estate and private equity, reducing its reliance on outside managers each year.
Private assets
The KIA is taking a similar approach. Al Sa’ad said the KIA is investing more in private assets and global infrastructure projects, arguing that “we need to take more risk in order to maintain the returns.”
Al Sa’ad said he doesn’t think the fund can match the returns of the past decade over the next 10 years. “That’s why we want to do something different. That’s why we are expanding in infrastructure, in credit.”
The KIA started as a Bank of England account dedicated to receiving oil money in 1953, according to its website. It has investments in areas including equities, bonds, real-estate and infrastructure.
US investment
The fund, which has been investing in ports, airports and power distribution, says boosting US investment is contingent upon President-Elect Donald Trump holding to a promise to increase infrastructure spending.
“To write a big cheque, you need to see projects in infrastructure,” Al Sa’ad said. “Otherwise there’s no size. You need scale.”
