VZCZCXRO1896
PP RUEHDE RUEHDIR
DE RUEHKU #1690/01 3371011
ZNY CCCCC ZZH
P 031011Z DEC 07
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 0377
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 001690 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
DEPT FOR NEA/ARP, EEB/TPP 
 
E.O. 12958: DECL: 12/02/2016 
TAGS: ECON EFIN EINV KU
SUBJECT: PRESS PROVIDES RARE GLIMPSE INTO KUWAIT'S 
INTERNATIONAL INVESTMENTS 
 
 
Classified By: CDA Alan Misenheimer for Reasons 1.4 (b) and (d) 
 
 ¶1.  (SBU) On November 20, the Arabic-language daily Al-Qabas 
published an unusual table listing the overseas investments 
of the Kuwait Investment Authority's Fund for Future 
Generations by geographic distribution and asset class (see 
table in para 4).  To our knowledge, this is the first time 
that such information has appeared in the public domain. 
 
¶2.  (C) KIA Executive Director Ahmed Bastaki confirmed to 
A/DCM on November 25 that the article and figures published 
were accurate.  He explained that while KIA normally shuns 
media coverage, KIA management was not displeased to see the 
information appear in the press.  He said KIA has endeavored 
under current management to provide greater transparency but 
has been limited by Law 47 of 1982, which specifically 
prohibits the disclosure to the public of any information 
related to KIA's work and states the penalties for 
unauthorized disclosure of information to the public. 
Bastaki said that KIA wants to see the law "relaxed." 
 
¶3.  (C) Bastaki said KIA did not leak the information to the 
press.  He assumed the leak came from parliament.  He 
explained that the State Audit Bureau had requested 
information from KIA in response to KIA violations of its 
benchmarks for asset allocation.  He noted in particular that 
KIA investments were more heavily weighted in the U.S. than 
the benchmarks stipulated.  (Comment:  Bastaki appeared to be 
trying to reassure us that KIA remains and will remain 
heavily invested in the U.S. market; see note below.  End 
comment).  He said KIA complied with the Audit Bureau's 
request for information by providing "pages of documents" 
outlining and explaining KIA's investment practices.  While 
pleased that a snaphot appeared in the press, Bastaki 
stressed it was only a snapshot of the overall information 
provided, and he regretted that "more of our reasoning" was 
not included in the article as well. 
 
Table 
----- 
 
¶4.  (U) The following table appeared in Al-Qabas with some 
factual narrative but no commentary: 
 
 The asset class allocation of the Fund for Future 
Generations: 
 
 
      Previous Benchmarks (Percentage)    New Benchmarks 
(Percentage)      Current Holdings (Percentage) 
Cash  1-8   37    22.88 
Bonds 15-20 15-22 14.78 
Stocks      65-75 55-65 57.17 
Alt. Investments  4-6   4-6   1.73 
Real Estate 4-6   8-12  3.44 
 
 
The geographic allocation of the Fund for Future Generations: 
 
 
      Previous Benchmarks (Percentage)    New Benchmarks 
(Percentage)      Current Holdings (Percentage) 
America     45-55 38-43 52.88 
Europe      35-45 38-43 32.34 
Asia and Japan    10-15 13-17 8.96 
Emerging Markets  ----- 4-6   5.82 
 
 
 
The distribution of "alternative investments" in the Fund for 
Future Generations: 
 
 
Investment  Committed (Thousand USD)      Paid 
            (Thousand USD) 
 
Special Stocks    4,491,120   1,398,236 
Real Estate 2,566,928   1,182,959 
Provisional Funds 647,863     647,836 
Total 7,705,884   3,229,031 
 
 
Comment 
------- 
 
¶5.  (C) Bastaki's reaction to the publication of what has 
hitherto been close-hold information (although KIA has said 
in the past that in terms of the geographic distribution of 
 
KUWAIT 00001690  002 OF 002 
 
 
its investments, the amount invested in each country/region 
roughly corresponded to that country's/region's share of 
world GDP) is significant.  It lends credence to KIA's claim, 
voiced in recent meetings with us and supported by the 
then-Finance Minister's public disclosure in July that KIA's 
total funds under management were USD 213 billion, that KIA 
is committed to greater transparency. 
 
¶6.  (C) As for the information itself, we are struck by 
several things: 
 
-- that the ratio of stocks to bonds is so high, given KIA's 
reputation for being a very conservative investor.  However, 
we can probably assume that most of these stocks are blue 
chip. 
 
-- that KIA holds as much cash as it does.  Since this is a 
Fund for Future Generations, there is presumably no need for 
this fund to be especially liquid.  Letting upwards of $40 
billion of cash languish unproductively strikes us as a 
wasted opportunity. 
 
-- the growth of the real estate portfolio is interesting. 
Given KIA's complaints about taxes on U.S. real estate 
investments, we may assume that most of these properties are 
not located in the U.S. 
 
-- geographically, Bastaki's comments notwithstanding, the 
table shows that KIA now intends to funnel significantly less 
of its new investment into the U.S., slightly more into 
Europe and Asia (probably Japan/Korea) and significantly more 
into emerging markets (probably mostly China and, to a lesser 
degree, India and SE Asia).  This seems to be in line with 
KIA's concerns about CFIUS and NOPEC as well as its focus on 
growth in China. 
 
 
********************************************* * 
For more reporting from Embassy Kuwait, visit: 
http://www.state.sgov.gov/p/nea/kuwait/?cable s 
 
Visit Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
********************************************* * 
MISENHEIMER