Biggest Gulf Wealth Funds Are Faulted for Lagging on Governance

(Bloomberg) --

The biggest wealth funds in the Middle East are the worst performers relative to peers when ranked by their commitment to governance and resilience.

A study of sovereign investors published by Global SWF singled out several of the largest entities in the region for insufficient disclosure and their lack of transparency.

“The big three Middle Eastern funds seem to be getting worse at inspiring trust,” it said.

The data provider's analysis found that Australia's Future Fund, Norges Bank Investment Management and New Zealand's NZ Super had the highest levels of governance, sustainability and resilience -- or GSR.

A lack of visibility into government finances in the Gulf and the authorities' frequent failure to provide timely statistics have long been a source of frustration for investors. Uncertainty around wealth funds only grew after what Global SWF called “significant withdrawals” from some entities in the region during the past year when oil prices fell.

“Most were found to be swimming naked,” it said.

The GSR Scoreboard, introduced by Global SWF in 2020, is comprised of 10 elements related to governance, 10 concerning sustainability issues, and five on resilience
The results are converted into a percentage scale for each of the funds
The annual study covers 70 sovereign wealth funds and 30 public pension funds
Only four funds in the Middle East exceeded the 50% mark, including Abu Dhabi's Mubadala Investment Co. and Bahrain's Mumtalakat Holding Co.

Global SWF pointed to several reasons for its assessment of the Gulf's sovereign investors.

Abu Dhabi Investment Authority lost points “over its increasingly opaque annual report,” which no longer includes such details as the fund's relationship with the government, it said.

Qatar's wealth fund removed several indicators from its website, while Kuwait Investment Authority “provides less and less clarity around its two funds and how liquidity is affecting them,” according to the report.

In the case of Qatar Investment Authority, Global SWF said its website no longer features the fund's organizational chart while its governance section has become less comprehensive than previously.

KIA officials couldn't be reached for comment. ADIA declined to comment, as did a representative for QIA.

Most funds that improved their scores relied on better performance on environmental, social and governance -- or ESG -- metrics as well as sustainability, according to the report. Saudi Arabia's Public Investment Fund started building an ESG team, it said.