A fall in oil prices is unlikely to curtail the investment power of Gulf sovereign wealth funds as long as prices do not fall below the level needed to balance government budgets, the head of a Gulf investment bank said. Some Gulf Arab countries can balance their budgets with oil prices at as low as $50 a barrel, meaning the funds will still have cash to spare if prices continue to hover at $65 a barrel, Mohamad Sotoudeh, CEO of Dubai-based Essdar Capital said.
Oil prices have fallen nearly 60 percent from a record above $147 a barrel in July amid global economic turmoil that has weakened demand and spurred fears of a global recession. "There's still plenty to invest, maybe not as huge as before but it's still there and it's sustainable," Sotoudeh told Reuters on the sidelines of a Italian-Gulf conference in Rome. "They will be players for the long-term."
Essdar, which provides advisory and financial services, counts sovereign wealth funds as among its investors. The group also has an asset management arm that focuses on investments in infrastructure, real estate, utilities and financial groups.
Sovereign wealth funds, investment vehicles owned by governments that disclose little about their activities, have been increasingly active in buying Western assets over the past year, often armed with cash from soaring oil prices and trade.
The funds will continue backing development projects in their countries and investing elsewhere as they have in the past, Sotoudeh said, adding the funds had become more visible largely because investment from other sources had dried up due to the credit crisis. "I don't see any dramatic change in strategy by them. The reality is that the outside world has changed," said Sotoudeh. "They have been grabbing the headlines because investment from other places like Europe had come to a stop. But for them, it's business as usual. They have funds to invest."
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