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Doha Time & Temperature

‘SWFs may grow 35% to $11.4tn by 2013’
Wednesday, 12 March, 2008, 02:18 AM Doha Time

Business Reporter

Newton ... real estate splash
DOHA: Sovereign Wealth Funds (SWFs), which are estimated to have assets of $2.5tn this year, could reach between $3.2tn and $11.4tn in the next five years, according to Lehman Brothers.
However, the actual SWF growth would depend on oil/gas prices, economic growth in Asia, global economy and exchange rates, political reaction/regulation, investment returns and the pace of reserve accumulation and diversification, said Alastair Newton, senior political analyst, Lehman Brothers International.
Addressing a panel at the 3rd ‘Enriching the Middle East’s Economic Future’ conference, he said the SWFs and similar diversified reserves are estimated to be $2.5bn, represented 1.5% of the $167tn global financial assets in 2008.
Oil/gas and export surpluses are the main drivers of SWFs as high prices for hydrocarbons have pushed revenues in excess of current budget requirements, Newton said, adding the rapid growth of excess reserves and wealth is promoting more aggressive investments.
In terms of assets, the SWFs are approximately the same size as the global hedge fund and private equity industries put together, although without the leverage and high turnover.
Presenting four scenarios, Newton said on a weak note the SWFs could grow at a compounded annual growth rate (CAGR) of 5% to reach $3.2tn by 2013, while on a conservative estimate (base case), they could tick a 15% growth to $5.1tn.
In a high case scenario, Newton said the SWFs could register a 25% growth to $7.7tn and on an aggressive basis; they could grow 35% to $11.4tn by 2013.
A significant portion of global foreign exchange reserve could be routed to further fund SWFs, he said, adding there has been much speculation about new funds, often sparking international debates.
“It is in real estate that Gulf money is making the loudest splash,” he said, focusing on Qatari Diar, a state-owned company, that bought Chelsea Barracks.

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