Friday 16 January 2009
Abu Dhabi Wealth Fund Lost $125 Billion, Council Says
Abu Dhabi Investment Authority may have lost $125 billion last year, pushing the sovereign wealth fund to second place behind Saudi Arabia after the global credit crisis cut asset prices, economists at the Council on Foreign Relations said in a report.
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Abu Dhabi Wealth Fund Lost $125 Billion, Council Says
By Haris Anwar and Arif Sharif
15 January 2009
(Bloomberg) -- Abu Dhabi Investment Authority may have lost $125 billion last year, pushing the sovereign wealth fund to second place behind Saudi Arabia after the global credit crisis cut asset prices, economists at the Council on Foreign Relations said in a report.
Abu Dhabi’s fund was “hard hit by the recent fall in global equities,” Brad Setser and Rachel Ziemba wrote in the report released on the New York-based organization’s Web site. “A high allocation to equities, emerging market and private equity” contributed to the drop.
Erik Portanger, a spokesman for the Abu Dhabi Investment Authority, declined to comment. The Associated Press first reported the estimates yesterday. Abu Dhabi is the richest of seven states that make up the United Arab Emirates.
The worst financial crisis since the 1930s Great Depression has led to almost $1 trillion in losses at banks and financial institutions worldwide, helping drag the benchmark S&P 500 U.S. share index down 39 percent in 2008. Gulf sovereign wealth funds have invested billions of dollars in financial institutions. The Kuwait Investment Authority last January paid $3 billion for a stake in Citigroup Inc. and invested $2 billion in Merrill Lynch & Co. Abu Dhabi’s Investment Authority bought a 4.9 percent stake in Citigroup for $7.5 billion in November 2007.
The MSCI Asia Pacific excluding Japan Index slumped 53 percent in 2008, the most in its two-decade history, as the crisis pushed the world’s largest economies into recession.
‘Overstated’
Abu Dhabi’s fund was managing an estimated $328 billion at the end of 2008 compared with $453 billion a year earlier, said the report, which examined the four largest Gulf Arab sovereign funds. “The size of the Abu Dhabi Investment Authority has been overstated, sometimes by as much as 100 percent.”
The Council on Foreign Relations, founded in 1921, is an independent organization that promotes understanding of foreign policy and America’s role in the world.
The Saudi Arabian Monetary Agency had $501 billion under management at the end of last year, up from $385 billion in 2007, the report said. The Kuwait Investment Authority and the Qatar Investment Authority at the end of last year managed $228 billion and $58 billion, respectively.
Tumbling oil prices are forcing some Persian Gulf states to record budget deficits and may further reduce the size of their sovereign wealth funds. Crude is now selling at below the budget break-even point for seven of the Arab world’s 10 top oil producers and Saudi Arabia, the world’s biggest exporter, is forecasting its first deficit in at least seven years.
Crude oil fell for February delivery fell 5.4 percent to $35.28 a barrel after OPEC said that demand for its crude will decline 4.2 percent this year as the recession in the U.S., Europe and Japan curbs fuel use.
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