Dubai unveils new investment fund with billions in state-owned assets

Dubai is setting up a new fund to drive investments in strategically-important projects, adding to a constellation of state-backed wealth funds in the region that manage close to $4 trillion.

The Dubai Investment Fund will house assets worth billions of dollars and invest government money locally and internationally, state-run news agency WAM said on Monday. It will also have the power to establish companies and investment funds, as well as buy or merge firms.

“The fund will focus on investments in stocks, bonds, and securities to achieve sustainable returns and can explore prospects in local or international financial markets,” WAM said.

Dubai Deputy Ruler Sheikh Maktoum bin Mohammed will be chairman of the entity. The fund will include stakes in the city’s $33 billion utility, DEWA, toll operator Salik Co., and Dubai Taxi Co., all of which were privatized over the past year.

Those listings are part of a plan by the government to offer stakes in 10 state-owned companies. Details on the new fund’s total size weren’t immediately available, though the government’s stake in DEWA alone is valued at about $28 billion.

“Wealth funds bring the management of assets into the 21st century where sector experts can manage them in an investor-friendly way, said Tarek Fadlallah, head of Nomura Holdings Inc.’s asset management arm in the Middle East.

“When the state owns so many assets, it has an obligation to manage them responsibly, Fadlallah added. “Historically, it’s been a mishmash of ways to manage assets — some assets were placed under the Ministry of Finance while others sat under utility regulators and so on.”

Pooling assets under one umbrella encourages synergies among companies, helps increase transparency and allows industry experts to take the lead, according to Fadlallah.

Sovereign wealth

State conglomerate Dubai World will be affiliated with the new fund “while preserving its legal identity, WAM said. Dubai World’s holdings include DP World, whose Jebel Ali Port helped transform the city into a global trade hub. It wasn’t clear if those assets will be transferred into the new fund.

The emirate already has a sovereign wealth fund, the $341 billion Investment Corporation of Dubai. ICD owns Emirates Group, the parent company of the city-state’s airline, and is chaired by Crown Prince Sheikh Hamdan bin Mohammed Al Maktoum.

Neighboring Abu Dhabi is home to ADIA, Mubadala Investment Co. and ADQ. Those entities and others in the region, including Saudi Arabia’s Public Investment Fund and the Qatar Investment Authority, have spent billions of dollars globally over the past few years to diversify Gulf economies away from oil and win geopolitical influence.

“Wealth funds are having a moment in the Gulf where governments own the overwhelming majority of revenue-generating assets,” Nomura’s Fadlallah said.