After years of increasing allocations to sovereign wealth funds (SWF), the persisting decline in oil prices has led regional fund managers to prepare for major changes.
As Middle Eastern governments became more dependent on the influx of foreign currency from oil sales, SWFs were set up as an insurance policy against potential decreased revenue streams.
Derived from surpluses in reserves, SWFs provide a means of reallocating income into other investments in order to diversify the country’s revenue. Should funding decline, these investments could be sold on short notice to support economic growth.