Kuwait’s sovereign wealth fund, the Kuwait Investment Authority (KIA), has bet big on infrastructure with a pledge to directly invest up to $5 billion in the asset class over the next three-to-five years.
The commitment came off the back of last week’s 60th birthday celebration for the Kuwait Investment Office (KIO), the sovereign wealth fund’s London office, which manages more than £65 billion (€76 billion; $99 billion) globally across “most asset classes”, the KIO said in a statement.
During the celebrations, Bader al-Saad, the sovereign wealth fund’s managing director, said a team of six, helmed by KIO head Osama al-Ayoub, formerly of Goldman Sachs, was being assembled to manage the fund’s direct infrastructure investment programme, which will focus heavily on the UK.
In a separate statement, the KIO pointed out that “before year-end or latest by early next year, the KIA hopes to have its global infrastructure team operational out of the KIO”. To date, the sovereign wealth fund has been a “passive investor” in UK infrastructure through funds, holding stakes in the likes of London’s Gatwick Airport.
Despite having failed at its first direct investment attempt – a rebuffed £5.3 billion bid, together with Canada’s Borealis and the UK’s Universities Superannuation Scheme, to take over UK water firm Severn Trent – the KIA seems undaunted:
“We are looking at brownfield projects because of the cash flow streams and to diversify our portfolio, as we don’t think there is any money to make in fixed income, because of the zero interest rates,” al-Saad told the Financial Times, adding the KIA would target “companies that work in industries with a strong regulatory environment – water, power distribution and generation”.
The KIA does not, however, appear interested in becoming a greenfield investor: “Development is a different ball game, we are not developers. We are providers of long-term capital,” he told the newspaper.
Michael Watson, an infrastructure finance expert at law firm Pinsent Masons, believes it is up to the UK government to change that. “We seem to be missing a trick – the UK government needs to reassure investors of construction risk and procurement rules before trying to attract investors into the market.”
He argued: “This aspect is very important as whilst the UK remains very attractive for international investors in the secondary market, the opportunity exists to make the development market equally attractive”.