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West faces losing battle in fight for aid from Gulf sovereign funds

Post Arab Spring, entities are investing more in local economies

Gulf News

Dubai: A shift in focus from global to local investments by the big Gulf sovereign wealth funds, after the Arab Spring, is set to step up competition among Western governments, asset managers and companies hoping for some of their cash, a study by US fund manager Invesco Ltd. showed.

"Western governments, including the UK, have approached SWFs [the funds] from the Middle East to help with econ-omic recovery, but many will fight a losing battle," Nick Tolchard, head of Invesco Middle East, told reporters at a conference in Dubai.

"There is certainly less money to invest internationally, so the stakes are higher."

These funds are being allocated less money by their oil-rich governments post the Arab Spring, with surplus government cash available for international investment in the Gulf Arab region set to fall by 9 per cent in 2012.

The Arab Spring's popular anti-government protests forced governments to put more emphasis on boosting local economies and infrastructure, the study said, resulting in lower international investments.

"Western governments and large institutions need a strategic re-think on how they approach Gulf funds. There is clearly a lot more emphasis on local investments," Tolchard said.

Share of wealth

The Gulf region is home to some of the world's most prominent sovereign funds such as the Abu Dhabi Investment Authority, considered to be the world's largest, and the Qatar Investment Authority, among the most aggressive of global funds with stakes in large European corporates.

Abu Dhabi has been involved in talks this year over a stake in Britain's state-owned Royal Bank of Scotland.

Large global asset managers and Western governments have flocked to the regional sovereign funds to grab a share of their wealth.

Lapping up trophy assets

At the peak of the global financial crisis, some of the large Gulf funds stepped in to invest in high-profile financial names such as Citigroup Inc., Credit Suisse and Barclays. They are also heavy investors in high-end real estate in Europe and own trophy assets such as London's Harrods store and football clubs.

But after the Arab Spring, many Gulf governments have committed billions of dollars to boost salaries, provide housing and better infrastructure to the young Arab population.