The sovereign wealth funds of the Arabian Gulf are now a crucial source of capital and liquidity as much of the rest of the world copes with slower economic growth.
The sovereigns are taking a longer view than banks and wealth fund partnerships are also now one of the major driving forces behind the dramatic growth in Middle East private equity.
The total assets of sovereigns were estimated recently by Private Equity Intelligence (Preqin) at over $3 trillion with Middle East investors the largest regional grouping, accounting for more than 40% of all wealth fund capital. It is also estimated that as many as 60 private equity managers in the Middle East are currently seeking around $26 billion with sovereign wealth funds likely to be a vital source.
Preqin says 60% of the world's sovereigns are currently investing in private equity and have between $120 and $150 billion committed to the sector – equivalent to 10% of the entire global capital of private equity – with huge growth potential.
The sovereigns are also busy buying direct stakes in some of the world's largest private equity organisations. China Investment Corporation recently bought a $3 billion stake in Blackstone of the US; Abu Dhabi's Mubadala Development Corporation spent $1.3 billion on a stake in the Carlyle Group, also of the US; and the Abu Dhabi Investment Authority has a stake in another US private equity firm, Walden Capital.