Every day, thousands of people browse the halls of Harrods, pass beneath The Shard on their commute, and spend their working lives in the towers of Canary Wharf, rarely stopping to consider that these landmarks, as synonymous with England as any institution in the country, are owned by foreign states. What many regarded as fixtures of English commercial life now sit on the balance sheets of Middle Eastern governments. The logic extends beyond property: in 2021, Saudi Arabia’s Public Investment Fund acquired Newcastle United for £305 million, transforming a beloved century-old club into a state-backed asset. These are traces of a deliberate strategy, one that has placed Gulf sovereign wealth funds at the heart of economies far beyond their own borders.
- What Are Sovereign Wealth Funds?
Sovereign wealth funds (SWFs) are government-owned investment funds that manage a country’s surplus capital.[1] They invest across a range of assets, both domestically and internationally, depending on the objectives of the state that controls them. In the Middle East, these objectives have been closely tied to oil and gas revenues.
The first sovereign wealth fund was created in Kuwait in 1953 to manage the sharp rise in oil revenues and was followed by Saudi Arabia and Abu Dhabi during the 1970s. These states faced the problem of handling large and unpredictable revenues while building newly independent economies. [2] Sovereign wealth funds allowed governments to channel surplus oil revenues into long-term savings, helping stabilise public finances and safeguard national wealth for future generations. By absorbing swings in commodity prices and external shocks, they reduced budget volatility and managed foreign exchange earnings more effectively.
Until the 1990s, the major Gulf funds invested cautiously, placing much of their capital in fixed-income assets such as US government bonds, which, along with stability, also reinforced political ties. [3] The priority was stability and capital preservation. Over time, their investment strategies broadened to include equities, infrastructure, private companies, and other long-term assets, reflecting a gradual shift from simple reserve management to a more active role in global investment.
- The Distinctive Character of Middle Eastern Funds
By 2024, the Saudi Public Investment Fund (PIF), the Qatar Investment Authority (QIA), and Abu Dhabi’s ADIA, Mubadala, and ADQ ranked among the ten most active sovereign wealth funds globally for the third consecutive year. Together, these “Oil Five” accounted for roughly 61 per cent of global SWF investment activity, and with combined assets nearing $4 trillion, they control almost a quarter of total sovereign wealth fund assets worldwide.[4]
Over the last 5 years, opportunities have presented themselves to these SWFs amid global unrest. In 2022, the Russia-Ukraine war pushed oil prices to their highest since 2008, which led to a predicted $1.3 trillion more in revenues. With the Gulf currencies pegged to the dollar and limited pressure to spend domestically, much of this windfall was directed into sovereign wealth funds, substantially growing their pools of investable capital.[5]
Unlike Kuwait Investment Authority, which remains primarily a global portfolio investor, Saudi, Qatari, and Emirati sovereign funds are increasingly taking direct stakes and shaping business strategy in politically significant ways. Analysts and policymakers describe them as instruments of state influence, deployed to secure regime stability or advance foreign policy objectives.[6] This perception is reinforced by their governance: where Norway’s Government Pension Fund Global operates under extensive democratic oversight, Gulf funds ultimately answer to ruling families, a concentration of authority that shapes both their investment behaviour and their appetite for transparency.
- Governance, Transparency, and Public Scrutiny
Internationally, the Santiago Principles set out voluntary standards for governance, risk management, and transparency for sovereign wealth funds.[7] While widely accepted in theory, enforcement is weak. Implementation relies largely on self-reporting, with limited external oversight.
In the Gulf, this has led to uneven transparency. Some funds claim compliance without providing detailed evidence. The ADIA, for instance, states that internal committees ensure adherence to best practices, but offers little public documentation to support this.[8] According to industry rankings, Middle Eastern funds generally disclose far less information about their investments and strategies than many of their global counterparts.
This opacity allows funds to control public narratives around their activities. High-profile investments are highlighted, while others remain undisclosed. Sports acquisitions exemplify this pattern particularly clearly. Under Mohammed bin Salman, Saudi Arabia has used cultural and sporting investments to reshape international perceptions of the Kingdom, drawing attention away from human rights concerns and the Yemen conflict.[9] This strategy of both portfolio expansion and image repair was most visibly exemplified by Qatar’s hosting of the 2022 World Cup, despite widespread controversy over labour conditions and governance practices. These investments generate public goodwill and cultural presence that diplomatic efforts alone cannot achieve, functioning simultaneously as commercial holdings within broader portfolios, a practice critics have termed “sportswashing.”[10]
At the same time, global regulatory pressure is increasing. The EU’s 2025 revised FDI screening rules, for example, requires every Member State to perform more robust reviews of foreign investments in sensitive sectors, including AI, critical infrastructure, and key financial institutions, while closing the structural loophole that allowed investors to route deals through EU-based entities to avoid scrutiny. For Gulf SWFs, this would mean greater regulatory exposure across technology, energy, and financial services, longer approval timelines, and no easy workaround. [11]
- Investment as a Geopolitical Strategy
These sovereign wealth funds operate in an increasingly complex geopolitical landscape, with Gulf states deliberately directing capital across diverse jurisdictions through a flexible investment approach. This has included significant activity in China, often through co-investments with Asia-Pacific asset managers. China has steadily built economic links with the Gulf and, by 2020, had overtaken the European Union as the GCC’s largest trading partner. Its engagement in the region spans large-scale infrastructure projects linked to the Belt and Road Initiative, financial cooperation frameworks, and technology deployments led by state-backed firms under the Digital Silk Road programme.[12]
Sovereign wealth fund activity has at times blurred the line between investment and state support, illustrated by Qatar’s approach to UK property markets. Following the 2012 Olympics, QIA partnered with Dutch pension fund APG and British developer Delancey to redevelop former Olympic housing into East Village, which helped establish the build-to-rent model in the UK and eased housing pressures.[13] It also strengthened Qatar’s ties with the UK government by addressing a politically sensitive policy challenge.
Regional interventions have been even more explicit. Between 2023 and 2025, the QIA and ADQ’s $35 billion land-lease agreement for Egypt’s Ras al-Hikma coastal area is widely seen as having averted a near-term fiscal crisis, unlocking broader international financial support in the process.[14] Rather than a conventional commercial transaction, the deal has been described by observers as a form of financial intervention that may have deepened Egypt’s economic reliance on the UAE.
- The Legal Perspective
For law firms, the increased activity of Middle Eastern sovereign wealth funds has changed how foreign investment is approached in practice. Although these funds invest through companies and commercial contracts, they are ultimately owned by the state, which raises difficult questions about control, responsibility, and legal risk. One immediate concern is how far a fund may be treated as an extension of the state rather than an ordinary investor, particularly if a dispute arises or enforcement becomes necessary.
This is especially relevant where issues of sovereign immunity could limit counterparties’ ability to enforce judgments or contractual rights. At the regulatory level, the National Security and Investment Act 2021 has given the UK government broad powers to review and intervene in acquisitions involving state-linked investors. While the act does state that SWFs do not inherently pose any sort of national security risk, transactions involving Gulf sovereign wealth funds in sectors such as infrastructure, data, healthcare, or energy do face a higher likelihood of review and delay.
Limited public disclosure and concentrated decision-making within some funds can also complicate due diligence and governance arrangements. As these funds continue to invest heavily in the UK, legal advice increasingly involves managing the tension between treating them as commercial actors and recognising the public authority that ultimately stands behind them.
Conclusion
Sovereign wealth funds were once cautious tools to preserve national wealth and manage commodity swings. Middle Eastern funds, however, have evolved into some of the most consequential actors in global finance.
For the UK, this shift matters. Its legal framework was built around private companies pursuing profit, not state-backed investors whose involvement can blur the line between commercial investment and government influence. As Gulf funds expand into British infrastructure, property, and cultural institutions, the question is whether existing rules are equipped to recognise and respond to that difference.
FOOTNOTES:
[1] ‘Sovereign Wealth Fund (SWF): Definition, Examples, and Types’ (Investopedia) <https://www.investopedia.com/terms/s/sovereign_wealth_fund.asp> accessed 5 February 2026
[2] – ‘2 THE SHORT HISTORY OF SOVEREIGN WEALTH FUNDS from Sovereign Wealth Funds: Between the State and Markets on JSTOR’ <https://www.jstor.org/stable/j.ctv2tjdhjj.6> accessed 6 February 2026
[3] [4] [6] – Roll S, ‘Sovereign Wealth Funds and Foreign Policy’ (Stiftung Wissenschaft und Politik (SWP)) <https://www.swp-berlin.org/publikation/sovereign-wealth-funds-and-foreign-policy> accessed 5 February 2026
[5] ‘Rise of GCC Sovereign Wealth Funds: Magic Wand?’ (Al Habtoor Research Centre) <https://www.habtoorresearch.com/programmes/rise-of-gcc-sovereign-wealth-funds-magic-wand/> accessed 28 February 2026
[7] – ‘Santiago Principles® | IFSWF’ <https://www.ifswf.org/santiago-principles> accessed 3 February 2026
[8] – Bismuth R, ‘The Santiago Principles for Sovereign Wealth Funds: The Shortcomings and the Futility of Self-Regulation’ (2017) 28 European Business Law Review 69
[9] – ‘Sovereign Wealth Funds: Corruption and Other Governance Risks’ (Carnegie Endowment for International Peace, 26 June 2024) <https://carnegieendowment.org/research/2024/06/sovereign-wealth-funds-corruption-illicit-finance-governance-risks> accessed 5 February 2026
[10] [13] – BSIC, ‘The Rise of the Middle Eastern Sovereign Wealth Fund – BSIC | Bocconi Students Investment Club’ (24 September 2023) <https://bsic.it/the-rise-of-the-middle-eastern-sovereign-wealth-fund/> accessed 6 February 2026
[11]‘Rise of GCC Sovereign Wealth Funds: Magic Wand?’ (Al Habtoor Research Centre) <https://www.habtoorresearch.com/programmes/rise-of-gcc-sovereign-wealth-funds-magic-wand/> accessed 28 February 2026
[12] – ‘Sovereign Wealth Funds Boost Middle East M&A Growth’ (A&O Shearman, 11 December 2025) <https://www.aoshearman.com/en/insights/global-ma-insights/middle-eastern-sovereign-wealth-funds-boost-regional-ma> accessed 6 February 2026
[14] Bower E, ‘Built on Sand: Can Egypt’s New Seaside City Protect the Country from War at Its Borders?’ The Guardian (8 April 2024) <https://www.theguardian.com/global-development/2024/apr/08/built-on-sand-can-egypts-new-seaside-city-protect-the-country-from-war-at-its-borders> accessed 6 February 2026
