Gulf SWFs have become the swing vote in global capital flows

Are Gulf SWFs the new underwriters of the intelligence economy? StateStreet CEO Ron O’Hanley, speaking at the Milken Institute Global Conference in Los Angeles this week, has described the GCC’s deployment of capital as “an enormous export of capital to lots of people in this room” reshaping how transactions play out globally.

The framing signals a shift in how Gulf capital is viewed on the global stage. Gulf sovereign wealth funds (SWFs) have graduated from LPs writing checks to driving allocation and shaping terms and structures. GCC governments and SWFs have deployed some USD 3.2 tn in capital globally.

Why this new reality is particularly fragile now: “The Iran war, and what that is triggering now, I believe will be a big realignment of capital flows,” O’Hanley said. Regional escalations risk forcing Gulf firepower to turn inward to focus on domestic defense and reconstruction, thus costing US tech firms and AI hyperscalers their primary underwriter, according to the Council on Foreign Relations ’ Rebecca Patterson. Saudi Arabia's PIF already cut international allocations to 20% down from 30% in April, and there’s no replacement pool.

The counter-narrative? Mubadala is bullish on the US. With 44% of its portfolio already stateside, Deputy Group CEO Waleed Al Muhairi calls it “the best risk-reward” globally and sees a “V-shaped recovery” ahead, with further upside in AI infrastructure, energy, and healthcare.

Not everyone at Mubadala agrees. CIO Oscar Fahlgren told the same audience the world is “standing just in front of the worst energy crisis we have seen in living memory” and that markets haven’t begun to price the Strait of Hormuz closure’s effect on the real economy.

The global finance elite is hungry for a bumper year regardless. Apollo, Blackstone, and Morgan Stanley executives at Milken all flagged expanding M&A pipelines and a reopening IPO window for quality issuers, with Apollo President Jim Zelter pointing to “the ocean of private capital in aggregate.” Private credit, in particular, seems to be back in favor, with Carlyle CEO Harvey Schwartz framing them as a healthier “distributor of risk.”

The catch? All of this rests on a market PGIM’s John Vibert called “priced to perfection” — with much of the actual geopolitical risk “not yet priced in.”

Could the yield chase be going global? “Emerging markets, a forgotten asset class for the last six, seven years, became now a considerable asset class for global portfolios,” BTG Pactual Chairman Andre Esteves said, while MUFG’s US macro strategy head George Goncalves flagged that global rates are finally offering “competition for the US for the first time.”

MARKETS THIS MORNING-

South Korea’s Kospi soared over 5% to hit fresh highs earlier this morning as markets jumped on hopes of easing regional tensions. Apart from the Kospi, Asia-Pacific markets are closed for public holidays. Wall Street is also set to open higher, with futures in the green.

THE CLOSING BELL-

The DFM fell 0.9% yesterday on turnover of AED 755.7 mn. The index is down 5.3% YTD.

In the green: Islamic Arab Ins. Company (+15.0%), National Industries Group Holding (+10.1%), and Ekttitab Holding Company (+4.0%).

In the red: Mashreqbank (-5.0%), Al Ramz Corporation Investment and Development (-5.0%), and BHM Capital Financial Services (-4.8%).

Over on the ADX, the index fell 0.3% on turnover of AED 1.2 bn. Meanwhile, Nasdaq Dubai was down 0.9%.