Identifier
Created
Classification
Origin
07KUWAIT1690
2007-12-03 10:11:00
CONFIDENTIAL//NOFORN
Embassy Kuwait
Cable title:
PRESS PROVIDES RARE GLIMPSE INTO KUWAIT'S
how-toVZCZCXRO1896 PP RUEHDE RUEHDIR DE RUEHKU #1690/01 3371011 ZNY CCCCC ZZH P 031011Z DEC 07 FM AMEMBASSY KUWAIT TO RUEHC/SECSTATE WASHDC PRIORITY 0377 INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 001690
SIPDIS
NOFORN
SIPDIS
DEPT FOR NEA/ARP, EEB/TPP
E.O. 12958: DECL: 12/02/2016
TAGS: ECON EFIN EINV KU
SUBJECT: PRESS PROVIDES RARE GLIMPSE INTO KUWAIT'S
INTERNATIONAL INVESTMENTS
Classified By: CDA Alan Misenheimer for Reasons 1.4 (b) and (d)
C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 001690
SIPDIS
NOFORN
SIPDIS
DEPT FOR NEA/ARP, EEB/TPP
E.O. 12958: DECL: 12/02/2016
TAGS: ECON EFIN EINV KU
SUBJECT: PRESS PROVIDES RARE GLIMPSE INTO KUWAIT'S
INTERNATIONAL INVESTMENTS
Classified By: CDA Alan Misenheimer for Reasons 1.4 (b) and (d)
1. (SBU) On November 20, the Arabic-language daily Al-Qabas
published an unusual table listing the overseas investments
of the Kuwait Investment Authority's Fund for Future
Generations by geographic distribution and asset class (see
table in para 4). To our knowledge, this is the first time
that such information has appeared in the public domain.
2. (C) KIA Executive Director Ahmed Bastaki confirmed to
A/DCM on November 25 that the article and figures published
were accurate. He explained that while KIA normally shuns
media coverage, KIA management was not displeased to see the
information appear in the press. He said KIA has endeavored
under current management to provide greater transparency but
has been limited by Law 47 of 1982, which specifically
prohibits the disclosure to the public of any information
related to KIA's work and states the penalties for
unauthorized disclosure of information to the public.
Bastaki said that KIA wants to see the law "relaxed."
3. (C) Bastaki said KIA did not leak the information to the
press. He assumed the leak came from parliament. He
explained that the State Audit Bureau had requested
information from KIA in response to KIA violations of its
benchmarks for asset allocation. He noted in particular that
KIA investments were more heavily weighted in the U.S. than
the benchmarks stipulated. (Comment: Bastaki appeared to be
trying to reassure us that KIA remains and will remain
heavily invested in the U.S. market; see note below. End
comment). He said KIA complied with the Audit Bureau's
request for information by providing "pages of documents"
outlining and explaining KIA's investment practices. While
pleased that a snaphot appeared in the press, Bastaki
stressed it was only a snapshot of the overall information
provided, and he regretted that "more of our reasoning" was
not included in the article as well.
Table
--------------
4. (U) The following table appeared in Al-Qabas with some
factual narrative but no commentary:
The asset class allocation of the Fund for Future
Generations:
Previous Benchmarks (Percentage) New Benchmarks
(Percentage) Current Holdings (Percentage)
Cash 1-8 37 22.88
Bonds 15-20 15-22 14.78
Stocks 65-75 55-65 57.17
Alt. Investments 4-6 4-6 1.73
Real Estate 4-6 8-12 3.44
The geographic allocation of the Fund for Future Generations:
Previous Benchmarks (Percentage) New Benchmarks
(Percentage) Current Holdings (Percentage)
America 45-55 38-43 52.88
Europe 35-45 38-43 32.34
Asia and Japan 10-15 13-17 8.96
Emerging Markets -------------- 4-6 5.82
The distribution of "alternative investments" in the Fund for
Future Generations:
Investment Committed (Thousand USD) Paid
(Thousand USD)
Special Stocks 4,491,120 1,398,236
Real Estate 2,566,928 1,182,959
Provisional Funds 647,863 647,836
Total 7,705,884 3,229,031
Comment
--------------
5. (C) Bastaki's reaction to the publication of what has
hitherto been close-hold information (although KIA has said
in the past that in terms of the geographic distribution of
KUWAIT 00001690 002 OF 002
its investments, the amount invested in each country/region
roughly corresponded to that country's/region's share of
world GDP) is significant. It lends credence to KIA's claim,
voiced in recent meetings with us and supported by the
then-Finance Minister's public disclosure in July that KIA's
total funds under management were USD 213 billion, that KIA
is committed to greater transparency.
6. (C) As for the information itself, we are struck by
several things:
-- that the ratio of stocks to bonds is so high, given KIA's
reputation for being a very conservative investor. However,
we can probably assume that most of these stocks are blue
chip.
-- that KIA holds as much cash as it does. Since this is a
Fund for Future Generations, there is presumably no need for
this fund to be especially liquid. Letting upwards of $40
billion of cash languish unproductively strikes us as a
wasted opportunity.
-- the growth of the real estate portfolio is interesting.
Given KIA's complaints about taxes on U.S. real estate
investments, we may assume that most of these properties are
not located in the U.S.
-- geographically, Bastaki's comments notwithstanding, the
table shows that KIA now intends to funnel significantly less
of its new investment into the U.S., slightly more into
Europe and Asia (probably Japan/Korea) and significantly more
into emerging markets (probably mostly China and, to a lesser
degree, India and SE Asia). This seems to be in line with
KIA's concerns about CFIUS and NOPEC as well as its focus on
growth in China.
********************************************* *
For more reporting from Embassy Kuwait, visit:
http://www.state.sgov.gov/p/nea/kuwait/?cable s
Visit Kuwait's Classified Website:
http://www.state.sgov.gov/p/nea/kuwait/
********************************************* *
MISENHEIMER
SIPDIS
NOFORN
SIPDIS
DEPT FOR NEA/ARP, EEB/TPP
E.O. 12958: DECL: 12/02/2016
TAGS: ECON EFIN EINV KU
SUBJECT: PRESS PROVIDES RARE GLIMPSE INTO KUWAIT'S
INTERNATIONAL INVESTMENTS
Classified By: CDA Alan Misenheimer for Reasons 1.4 (b) and (d)
1. (SBU) On November 20, the Arabic-language daily Al-Qabas
published an unusual table listing the overseas investments
of the Kuwait Investment Authority's Fund for Future
Generations by geographic distribution and asset class (see
table in para 4). To our knowledge, this is the first time
that such information has appeared in the public domain.
2. (C) KIA Executive Director Ahmed Bastaki confirmed to
A/DCM on November 25 that the article and figures published
were accurate. He explained that while KIA normally shuns
media coverage, KIA management was not displeased to see the
information appear in the press. He said KIA has endeavored
under current management to provide greater transparency but
has been limited by Law 47 of 1982, which specifically
prohibits the disclosure to the public of any information
related to KIA's work and states the penalties for
unauthorized disclosure of information to the public.
Bastaki said that KIA wants to see the law "relaxed."
3. (C) Bastaki said KIA did not leak the information to the
press. He assumed the leak came from parliament. He
explained that the State Audit Bureau had requested
information from KIA in response to KIA violations of its
benchmarks for asset allocation. He noted in particular that
KIA investments were more heavily weighted in the U.S. than
the benchmarks stipulated. (Comment: Bastaki appeared to be
trying to reassure us that KIA remains and will remain
heavily invested in the U.S. market; see note below. End
comment). He said KIA complied with the Audit Bureau's
request for information by providing "pages of documents"
outlining and explaining KIA's investment practices. While
pleased that a snaphot appeared in the press, Bastaki
stressed it was only a snapshot of the overall information
provided, and he regretted that "more of our reasoning" was
not included in the article as well.
Table
--------------
4. (U) The following table appeared in Al-Qabas with some
factual narrative but no commentary:
The asset class allocation of the Fund for Future
Generations:
Previous Benchmarks (Percentage) New Benchmarks
(Percentage) Current Holdings (Percentage)
Cash 1-8 37 22.88
Bonds 15-20 15-22 14.78
Stocks 65-75 55-65 57.17
Alt. Investments 4-6 4-6 1.73
Real Estate 4-6 8-12 3.44
The geographic allocation of the Fund for Future Generations:
Previous Benchmarks (Percentage) New Benchmarks
(Percentage) Current Holdings (Percentage)
America 45-55 38-43 52.88
Europe 35-45 38-43 32.34
Asia and Japan 10-15 13-17 8.96
Emerging Markets -------------- 4-6 5.82
The distribution of "alternative investments" in the Fund for
Future Generations:
Investment Committed (Thousand USD) Paid
(Thousand USD)
Special Stocks 4,491,120 1,398,236
Real Estate 2,566,928 1,182,959
Provisional Funds 647,863 647,836
Total 7,705,884 3,229,031
Comment
--------------
5. (C) Bastaki's reaction to the publication of what has
hitherto been close-hold information (although KIA has said
in the past that in terms of the geographic distribution of
KUWAIT 00001690 002 OF 002
its investments, the amount invested in each country/region
roughly corresponded to that country's/region's share of
world GDP) is significant. It lends credence to KIA's claim,
voiced in recent meetings with us and supported by the
then-Finance Minister's public disclosure in July that KIA's
total funds under management were USD 213 billion, that KIA
is committed to greater transparency.
6. (C) As for the information itself, we are struck by
several things:
-- that the ratio of stocks to bonds is so high, given KIA's
reputation for being a very conservative investor. However,
we can probably assume that most of these stocks are blue
chip.
-- that KIA holds as much cash as it does. Since this is a
Fund for Future Generations, there is presumably no need for
this fund to be especially liquid. Letting upwards of $40
billion of cash languish unproductively strikes us as a
wasted opportunity.
-- the growth of the real estate portfolio is interesting.
Given KIA's complaints about taxes on U.S. real estate
investments, we may assume that most of these properties are
not located in the U.S.
-- geographically, Bastaki's comments notwithstanding, the
table shows that KIA now intends to funnel significantly less
of its new investment into the U.S., slightly more into
Europe and Asia (probably Japan/Korea) and significantly more
into emerging markets (probably mostly China and, to a lesser
degree, India and SE Asia). This seems to be in line with
KIA's concerns about CFIUS and NOPEC as well as its focus on
growth in China.
********************************************* *
For more reporting from Embassy Kuwait, visit:
http://www.state.sgov.gov/p/nea/kuwait/?cable s
Visit Kuwait's Classified Website:
http://www.state.sgov.gov/p/nea/kuwait/
********************************************* *
MISENHEIMER