Kuwait Buoyant on Infrastructure, but Cool on Stocks

The Kuwaiti sovereign wealth fund will focus on increasing its infrastructure investments in UK, US, and European markets.

(January 27, 2014) — One of the world’s largest sovereign wealth funds has announced it will expand its investments in western infrastructure.

The Kuwait Investment Authority (KIA), which is thought to have $386 billion under management according to the Sovereign Wealth Fund Institute, will increase its infrastructure investments in the US, the UK, and other European markets in the coming months.

The KIA is a well-known player in infrastructure already. Last year, the fund was part of a Canadian-led consortium that bid for the UK’s Severn Trent water company, but eventually walked away after the company refused to engage in talks before a bid deadline expired, according to media reports.

Speaking to pan-Arab channel al-Arabiya, Managing Director Bader al-Sa’ad said he was also concerned about “the high level of cash in many markets in the US, Europe, Japan, and some developing countries that have contributed to the abnormal rise in the values of assets”.

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“This caused the Japanese stock market to grow by more than 50% last year and American stock market to grow by 27%, in addition to the growth of the European markets,” he said.

He told the news channel he believes the markets are currently experiencing a sort of exaggerated optimism, he said, adding that the circumstances which led to the rise in assets in 2013 was unlikely to happen again, especially considering that interest rates are at zero in some countries.

The KIA, which manages the major oil producer’s wealth, has stakes in companies including BP, Vodafone, and HSBC, according to Thomson Reuters data. It has also has a $2.5 billion investment quota in China, the highest possible for a foreign investor.

Western infrastructure has proved a popular investment over the past few months. Norway’s sovereign wealth fund (SWF) has made purchases in France and the UK, while Denmark’s PensionDanmark bought a 49% stake in six wind farms based in Scotland and Wales in December 2013. The Danish fund has €1.1 billion in infrastructure assets, according to Preqin.

The Dutch and Danish were declared as leading the way among institutional infrastructure investors according to Preqin data from November 2013, with Dutch pension giant PGGM having the largest allocation to infrastructure assets at €4 billion.

Preqin’s survey found 66% of institutional investors are targeting European investments in the next 12 months, compared with 24% seeking similar investments in North America. Just 6% are targeting infrastructure investments in Asia.

Danish pension giant ATP has €1.9 billion invested in infrastructure assets and is targeting both North America and Europe next year, while the German government agency DEG and German asset manager KGAL—both prolific investors in infrastructure assets with almost €3 billion in investments between them—stated they were only targeting European assets.

Related Content: Who Are Europe’s Biggest Infrastructure Investors? and Kuwait’s SWF, Malaysian Pension to Make Cornerstone IPO Investment  

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