Kuwait has no intention of selling its investments in U.S. banking giants Merrill Lynch and Citigroup, in the short term, its sovereign wealth fund said in newspaper reports published on Sunday.
"The Kuwait Investment Authority (KIA) has no intention of selling its investments in Merrill Lynch or Citigroup in the short term, as the authority relies in its investment policies on a long-term view," the finance minister said in comments published Sunday in local newspapers.
Kuwait's sovereign wealth fund, which manages state assets in the world's fourth-biggest oil exporter, has come under fire from some parliamentarians for investing $5 billion in Citigroup and Merrill Lynch. Merrill has since been bought by Bank of America.
Each share bought in Merrill Lynch is now equivalent to 0.8595 share in Bank of America, the daily al-Rai quoted a statement from KIA as saying.
In late 2007, state-owned KIA acquired stakes worth $3 billion in Citigroup and $2 billion in Merrill Lynch, which was acquired by Bank of America last year. It did not disclose the size of the stake at the time.
But Shamali said that by the end of November, 2008, the stake in Citigroup was worth just $2.4 billion and in Bank of America just under $1 billion.
KIA in the meantime received returns worth $318 million from the two investments up to the end of last year, Shamali said in the written reply to a question from lawmaker Waleed al-Tabtabae published in local dailies al-Qabas and al-Rai.
Local media quoted Mustafa al-Shamali as saying that KIA’s investment policy “is based on a long-term vision” but that it can exit the investments if it wants to.
Plunge in values
The value of foreign assets managed by the KIA, fell by about 9 billion dinars ($31.33 billion) in the nine months to December 2008, due to the financial crisis, two lawmakers said in February after a government briefing.
Established in 1982, KIA manages two state reserve funds the value of whose assets reached around $300 billion before the global economic meltdown. KIA managed assets worth about 49 billion dinars ($171 billion) as of Dec. 31, the MPs said.
There are no current official figure on the holdings of the funds, but the government said in February that they lost around $33 billion in value, though independent reports said the losses were much higher
At the time of Kuwait's purchase, the Abu Dhabi Investment Authority (ADIA), the sovereign wealth fund run by the government of the UAE capital, also bought a stake worth $7.5 billion in Citigroup to become one of its biggest shareholders.
Since last October, KIA has reduced the exposure of its key Future Generation fund to global equities markets, shifting assets to cash funds, the government said in January.
In May, Shamali told Reuters that the Gulf state was not reducing its dollar assets and was keeping some liquid assets to meet its budget requirements.