Sovereign wealth funds are enormous, independently managed but state-directed investment vehicles, normally established to invest surpluses. Well-known examples include Norway's Government Pension Fund, worth $2.2trn (or $400,000 per citizen), and Alaska's Permanent Fund. In both cases, revenues from natural-resource extraction are invested in public and private markets, with the proceeds going to government spending or directly to citizens. Their purpose is not generating higher returns than private citizens could achieve, but converting a volatile stream of commodity income into stable and diverse financial assets—smoothing risk across markets and over time.
The hydrocarbon kitties of the six Gulf Co-operation Council members have between them deployed more than $430bn in capital since 2021. For every petrodollar they invest, 75 cents ends up abroad, in everything from AI startups and private credit to football clubs and TikTok. They oversee over $5trn of assets globally, up from $3trn in 2021.
In the 2026 Gulf war, Iran's retaliatory strikes destroyed $25bn of oil and gas infrastructure, according to Welligence, a consultancy. GCC countries face additional costs of $30bn-50bn on pipelines to bypass the Strait of Hormuz, as well as higher defence spending to restock interceptor missiles. In past crises, the funds have been called on to foot the bill: during the pandemic, Abu Dhabi Investment Authority withdrew $24bn and the Kuwait Investment Authority $25bn, equivalent to 3-4% of their assets under management, according to Diego Lopez of Global SWF, a research firm.
Over the past five years the funds have invested more in illiquid private assets. Emirati and Saudi vehicles have poured nearly $100bn and some $40bn, respectively, into AI startups and data centres. Between 2021 and 2025 about $140bn in GCC sovereign wealth went into property and infrastructure, and perhaps $80bn into private credit—assets that are harder to liquidate in a pinch. Other investments are tied to foreign-policy goals such as food security and critical minerals. The UAE's funds own stakes in mines and farms across Africa. Saudi Arabia's Public Investment Fund has backed mining businesses in Brazil and agricultural ones in South-East Asia.
Abu Dhabi created L'Imad in January 2026, absorbing ADQ, an existing wealth fund. L'Imad has large stakes in national infrastructure operators including TAQA, AD Ports Group, Abu Dhabi Airports and Etihad Rail. Mubadala, another Abu Dhabi pot, is funding the expansion of Al Maryah Island, the emirate's financial hub, and Masdar, a renewable-energy firm. As Iranian projectiles dent the allure of the Gulf for foreigners and their money, these domestic investments look riskier: diminished airline traffic, lower hotel occupancy and plummeting property sales are stanching cashflows. Emirates Global Aluminium, co-owned by Mubadala and Investment Corporation of Dubai, said it could take up to a year to repair missile-debris damage.
In 2025 President Trump ordered the creation of an American sovereign-wealth fund, despite the country carrying $29trn in debt and running a widening fiscal deficit. Scott Bessent, the treasury secretary, described the plan as a way to "monetise the asset side of the balance-sheet" by investing in stocks, property and private markets.
Critics note that a wealth fund is not an income-generating machine but a vehicle for transferring risk: when governments invest in high-yielding assets, they compel taxpayers to become shareholders, bearing both the upside and the volatility. The Modigliani-Miller theorem, published in 1958 and later awarded a Nobel prize, showed that companies cannot create value simply by exploiting gaps between low borrowing costs and high equity returns; the same logic applies to governments. A state that invests in risky assets should expect its borrowing costs to rise, as markets price in the additional fiscal risk.
America has no resource windfall from which to diversify, no surplus to invest, and no reason to think the government would outperform private investors.
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