Sovereign wealth funds may withdraw $404.3 billion from global stock markets this year if crude prices stay between $30 to $40 per barrel as oil-rich nations seek to shore up their finances, according to the Sovereign Wealth Fund Institute.
The value of listed equities held by the world’s largest wealth funds will probably drop to $2.64 trillion this year, from about $3.04 trillion at the end of 2015, the Las Vegas-based SWFI said in a report on Monday, Bloomberg reported.
Withdrawals are set to approximately double from last year, when sovereign funds sold about $213.4 billion of equities, it said.
"The era of petrodollar-filled wheelbarrows being dumped into giant vats seems to be numbered," according to the institute. "Commodity wealth funds have to be concerned about the state of their country’s finances, since many were created to either be stabilization funds, intergenerational savings vehicles or a combination thereof." Sovereign funds from Qatar to the United Arab Emirates and Russia, which amassed about $7 trillion of assets as oil soared higher than $100 a barrel, are now liquidating investments after a more than 70% slump in crude since 2014.
During the boom, oil countries led a surge in investments in the US and Europe, buying stakes in iconic companies, European soccer clubs and luxury homes.
Direct investments by sovereign funds also dropped to $113.9 billion in 2015 from $122.9 billion a year earlier, the report said. Funds based in the oil-rich Persian Gulf, such as the Abu Dhabi Investment Authority and Qatar Investment Authority, are facing the most "financial distress", the report said, while Russia has also "steadily been depleting its sovereign wealth fund to finance large-scale projects, fund parts of government and attract direct investment," it said.
