Diversification of Kuwait’s Pension Fund

$112 billion, Kuwait’s pension fund plans to boost investments in private equity and infrastructure following an overhaul that left it sitting on too much cash. The management team was brought in during 2017 to transform the state-owned institution after a corruption scandal involving a previous manager. The fund has since exited more than $20 billion in questionable deals in a “major clean-up” of its portfolio.

The Public Institution for Social Security, also known as PIFSS, had a record investment profit of $7.3 billion in the three months through June, an almost fourfold increase from a year earlier. The fund aims to have 12% to 17% of its portfolio in real estate, followed by private equity at between 8% and 13%, and infrastructure at 3% to 10%, he said, without detailing current holdings. The fund has implemented policies to improve disclosure, avoid conflicts of interest and introduced whistle-blowing processes. It decentralized investment decision-making to a four-member committee.

Employee numbers in the investment division were increased to over 100 in its investment division – more than that of the two biggest asset managers in the oil-rich country combined – while the unit was split into eight departments from three. 40% and 60% of the fund’s portfolio is in stocks and fixed income. PIFSS is the second-largest investor in the local market after Kuwait Investment Authority, the world’s fourth-largest sovereign wealth fund. It has holdings in more than 40% of the stocks on the domestic exchange although most of its portfolio is offshore.

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