Sovereign wealth funds in the Gulf have been pulling money out of asset managers at the fastest rate on record as they rush to boost their economies following the collapse in the oil price.
At least $19bn was withdrawn by state institutions during the third quarter, according to data provider eVestment, denting investment managers’ profits and raising concerns about the prospect of further outflows.
The true level of withdrawals this year is likely to be much greater as some asset managers, including BlackRock, the world’s biggest fund house, do not disclose their dealings with sovereign funds. Morgan Stanley estimates BlackRock suffered redemptions of $31bn from government institutions during the second and third quarters. BlackRock declined to comment.
Governments in oil-rich countries have been forced to raid their wealth funds after the price of crude slumped by more than half to $43 a barrel.
Aberdeen Asset Management, Northern Trust, Franklin Resources and Old Mutual Asset Management have all said they have been hit by government funds redemptions this year.
Martin Gilbert, chief executive of Aberdeen, Europe’s third-largest listed fund house, which reported its 10th consecutive quarter of outflows last week, said: “If the oil price remains low, we will see more redemptions from sovereign wealth funds.”
Four of the five largest sovereign funds in the world are based in oil-rich countries. More than three-quarters of oil-backed vehicles outside of North America expect governments to withdraw money due to sustained low oil prices, according to research by Invesco, the US fund manager.
The Saudi Arabian Monetary Agency, the fourth-largest sovereign wealth fund in the world with $672bn in assets, has withdrawn about $70bn from external managers this year to support its economy.
If sovereign fund redemptions continue at the same pace, listed asset managers could see their earnings per share drop 4.1 per cent, according to Morgan Stanley.
Jeffrey Levi, a partner at Casey Quirk & Associates, an investment management consultancy, said: “There is big pressure on governments because of the oil price drop and they are looking to sovereign funds for cash flow.”
Most sovereign wealth funds are unwilling to discuss recent redemptions and asset managers are also being coy about their dealings with the funds due to confidentiality agreements.
