Governments across the Middle East are looking to transition from hydrocarbon-dependent economies to diversified, knowledge-based ones, as exemplified by comprehensive national plans across the region, such as the United Arab Emirates’ (UAE’s) Vision 2030, Saudi Arabia’s Vision 2030, and Qatar National Vision 2030, among others. Despite some nuances, these initiatives share a common objective: to achieve economic diversification, strategic influence, and long-term wealth preservation.
A major driving force behind bringing these goals to fruition is the region’s prominent sovereign wealth funds (SWFs). Led by the five largest — Abu Dhabi Investment Authority (ADIA), Mubadala, Abu Dhabi Developmental Holding Company (ADQ), The Public Investment Fund (PIF), and Qatar Investment Authority (QIA) — these funds collectively managed roughly $4.1 trillion in assets under management (AUM) as of 2023. And projections suggest that the combined AUM of the 19 SWFs in the Gulf region could reach $7.6 trillion by 2030. To put this in context, the Gulf region hosts four out of the top 10 largest SWFs globally.
Leveraging these eye-popping cash reserves, these SWFs have become some of the most sophisticated investors in the world and have had a significant impact on private markets investing, leveraging direct and co-investments, fund investing, internal subsidiaries, and other creative structures. To support national economic development and reform plans, the region has coalesced around common investment themes, including artificial intelligence (AI), sports, and renewable energy. This report examines how SWFs are bolstering national economic strategies through investments in these sectors, both domestically and abroad.
As Gulf nations seek economic diversification, leadership in AI has become a key focus. AI investments are focal components of PIF’s commitment to generate $300 billion to the country’s non-oil GDP by 2025 as well as Qatar’s national AI strategy launched in 2019. The UAE’s “National AI Strategy 2031” is perhaps the most ambitious plan in the region, aiming for AI to contribute 40% of the country’s GDP by 2031.
To achieve the AI and economic targets outlined in their development strategies, Gulf nations are looking to position themselves as technology hubs that rival Silicon Valley, using their vast capital and energy reserves for research, infrastructure, and talent attraction. Importantly, these plans and ambitions are translating into action and capital deployment. According to PitchBook, the Middle East saw a record number of VC deals for generative AI startups in 2023.
At the same time, international AI investments and strategic partnerships remain a core aspect of these country’s strategies to access attractive AI opportunities, exemplified by the regions’ SWFs investing heavily in both domestic and international AI opportunities:
“We are fairly well positioned to be an AI hub outside of the U.S. AI will consume a lot of energy and we are the global leader when it comes to fossil fuel energy and when it comes to renewable energy.”PIF Governor Yasir Al-Rumayyan at a Miami investment event sponsored by the sovereign wealth fund.
“We are fairly well positioned to be an AI hub outside of the U.S. AI will consume a lot of energy and we are the global leader when it comes to fossil fuel energy and when it comes to renewable energy.”
Importantly, as the Gulf region emerges as a leader in AI technology and innovation, it has begun to attract substantial foreign interest and investment. Notably, Microsoft and Silver Lake have invested $1.5 billion and $800 million, respectively, into G42. At Saudi Arabia’s annual technology conference, LEAP, Amazon Web Services CEO Adam Selipsky announced a $5.3 billion investment in Saudi Arabia for data centers and AI technology. These investments reflect progress toward the broader goal of Gulf nations to boost domestic innovation and drive local investments in technology.
Sports and related infrastructure have also emerged as key domestic investment priorities in the region, given these assets’ potential to drive economic growth by boosting national revenues, tourism, and labor markets. From a broader perspective, sports investments also provide attractive return profiles, benefiting from lucrative, recurring media contracts and a “halo” effect that unlocks access to multiple industries and ancillary revenue streams.
Further, as long-term investors, SWFs are well-suited for sports investments, given their extended hold periods, which surpass the typical timelines of venture capital or private equity. Many of the region’s SWFs are central in leveraging sports investments to diversify local economies. For example, PIF is a regional leader in domestic sports investing. Last year, they established SRJ Sports Investments, a holding company intended to acquire and develop high-growth sports assets in Saudi Arabia and the MENA region. This kind of investment structure has proven particularly effective in sports, as demonstrated by Fenway Sports Group.
PIF’s domestic sports investing also includes controlling stakes in four leading clubs in the Saudi Pro League: Al-Ittihad, Al-Ahli, Al-Nassr, and Al-Hila. The fund aims to help the league become one of the world’s top soccer leagues, already drawing attention with high-profile transfers like Cristiano Ronaldo to Al-Nassr, which is expected to spark a wave of significant signings in the coming seasons.
Equally, international sports teams and assets offer appealing return profiles for SWFs in the region, which have been notably active in the global sports market:
Notably, Gulf sovereign wealth funds’ investments in US-based sports teams and leagues have been more limited than those in European teams, largely due to stricter regulations and higher barriers to entry into the US market. US sports leagues impose more restrictive rules on ownership limits, voting rights, and deal structures than their European counterparts, challenging these investors’ preference to acquire majority stakes and operational control.
Renewable energy is also a focal priority for these funds as they continue to diversify their hydrocarbon-based economies. Five of the 12 Gulf countries have committed to net-zero emission targets: The UAE and Oman aim to achieve net zero by 2050, while Bahrain, Kuwait, and Saudi Arabia have set their targets for 2060.
Several national initiatives are supporting these targets. Saudi Arabia has committed to cutting carbon emissions by more than 278 million tons annually and aims to generate 50% of its domestic energy from renewable sources by 2030. Similarly, the UAE’s “Energy Strategy 2050” outlines plans to boost renewable energy to 44% of its total energy mix by 2030. Other nations in the region have also launched similar initiatives to align with their net-zero goals.
The region’s sovereign wealth funds are pivotal in advancing efforts to meet these climate targets. For example, PIF has committed to developing 70% of Saudi Arabia’s target renewable energy mix by 2030 and investing more than $10 billion in green projects by 2026.
In January 2020, the Qatar Investment Authority (QIA) declared it would cease new hydrocarbon investments. Currently, about 50% of QIA’s power generation investments have zero carbon emissions, with 46% of its infrastructure power assets focused on renewables. The UAE’s sovereign wealth funds, including ADIA and Mubadala, are also aligning their strategies with the nation’s net-zero ambitions by integrating renewable energy investments.
Notably, these nations and their sovereign wealth funds are well-positioned to invest in domestic renewable energy projects due to the region’s abundant natural resources. The MENA region captures about 25% of the world’s solar energy, which the World Bank estimates could meet over half of global electricity demand. Moreover, solar power production costs in the region are roughly one-fifth of the global average.
Additionally, 75% of the MENA region experiences strong winds to support large-scale wind farms, with ample land available for development. Cost-efficient solar and wind power prices and the Gulf’s strategic location for exports further position these countries to capitalize on emerging hydrogen opportunities.
Ultimately, this unique combination and access to natural resources makes the region an attractive hub for domestic energy investments. Several pioneering initiatives, spearheaded by the region’s sovereign wealth funds, are already beginning to take shape:
In addition to their involvement in domestic energy projects, the region’s sovereign wealth funds have also been active investors in renewable energy globally. ADIA’s investment alongside APG and CalSTRS into US-based solar platform Arevon, Mubadala’s joint investment with Global Infrastructure Partners in offshore wind provider Skyborn Renewables, and QIA’s and Oman Investment Authority’s investment in US-based EV battery producer Ascend Elements stand out as notable examples.
Ultimately, the region’s sovereign wealth funds have, and will continue to play, a pivotal role in driving economic diversification and expanding national wealth.
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