The Geopolitics of Sovereign Wealth Funds

Cohen joined me for a taping of FP Live on the sidelines of the Doha Forum in Qatar last weekend. The episode is part of a partnership this year between FP and the Goldman Sachs Global Institute.

Earlier this year, U.S. President Donald Trump made his first foreign visit not to Europe or Asia, but to three countries in the Middle East: Qatar, Saudi Arabia, and the United Arab Emirates. Each of these Gulf monarchies has built up sovereign wealth funds that are, in addition to serving as investments, instruments of soft power and state objectives. Jared Cohen and George Lee, two co-heads of the Goldman Sachs Global Institute, described in Foreign Policy how these sovereign funds “are now among the most consequential asset owners and allocators of capital in the global economy.”

Earlier this year, U.S. President Donald Trump made his first foreign visit not to Europe or Asia, but to three countries in the Middle East: Qatar, Saudi Arabia, and the United Arab Emirates. Each of these Gulf monarchies has built up sovereign wealth funds that are, in addition to serving as investments, instruments of soft power and state objectives. Jared Cohen and George Lee, two co-heads of the Goldman Sachs Global Institute, described in Foreign Policy how these sovereign funds “are now among the most consequential asset owners and allocators of capital in the global economy.”

Cohen joined me for a taping of FP Live on the sidelines of the Doha Forum in Qatar last weekend. The episode is part of a partnership this year between FP and the Goldman Sachs Global Institute.

Ravi Agrawal: Let’s start with some basic definitions. What is a sovereign wealth fund? Why have they become increasingly important?

Jared Cohen: If we step back for a minute, the idea that the Middle East has a ton of wealth is not new. The existence of sovereign wealth funds is not new either. Kuwait had the world’s first sovereign wealth fund in 1953, and its origin story is fascinating. When Sheikh Abdullah [al-Salim al-Sabah], the ruler of the emirate of Kuwait, attended Queen Elizabeth’s coronation, he got a dressing down from British Prime Minister Winston Churchill. Churchill was worried that Kuwait was becoming too wealthy and that it was going to screw up the London Stock Exchange and the sterling. The sheikh ignored him, and yet, a week later, an all-British board and a British governor was running the first sovereign wealth fund in the world.

Fast-forward to today, we’re talking about this because you have $14 trillion of sovereign wealth worldwide. Some of that sovereign wealth comes from commodities and some of it comes from trade surpluses and other revenues. Of that more than $14 trillion, $5.6 trillion is concentrated in four countries in the Middle East: Saudi Arabia, Qatar, the UAE, and Kuwait. To put that in perspective, there was only $2.3 trillion concentrated in those four countries in 2015.