Bahrain's sovereign wealth fund, Mumtalakat, has weathered economic and political uncertainty both at home and throughout the wider Middle Eastern region, and is now back on a path to growth, with its aviation holdings being at the forefront of this turnaround.

More diversified than its Gulf Co-operation Council (GCC) peers, Bahrain’s economy has weathered the oil price downturn relatively well. Though government revenues have been slashed, the resilience of the country's non-oil economy is expected to see gross domestic product growth (GDP) hit 3.6% by the end of 2015, according to the Bahrain Economic Development Board. For the country’s sovereign wealth fund, Mumtalakat, this bodes well for its domestically held investments. Decoupled from government finances and with a focus on non-hydrocarbon investments, Mumtalakat is reaping the benefits of Bahrain’s more balanced economic model. 

Yet, recent years haven’t always been kind to the fund. Political unrest in the country, as well as the wider region, crashing real estate prices and difficulties in some of its largest holdings, including Gulf Air, all contributed to a five-year loss-making run between 2008 and 2012. These difficulties appear to have lifted since 2013, however, as Mumtalakat has made a strong return to profitability. 

“We are satisfied with the performance of our Bahrain-based businesses in our portfolio but [we are] working on improving them further. The Bahrain economy is predicted to grow by 4.5% in the non-oil sector this year and the factors that have underpinned non-oil growth in Bahrain and the wider region in recent years are not changed significantly by the volatility in the oil price,” says Mahmood Al Kooheji, chief executive of Mumtalakat. 

In particular, the fund’s aviation holdings, including Bahrain’s national carrier Gulf Air and Bahrain Airport Company, have been a source of strong growth. This follows the successful restructuring of Gulf Air in which streamlining initiatives – of the company’s fleet, operations and staff – are slowly turning the carrier’s fortunes around. “I think it’s clear that there is a real role in the sector that an airline with Gulf Air’s strengths in its excellent regional route network and strong value proposition is particularly well placed to meet,” says Mr Al Kooheji.

Getting connected 

To capitalise on the opportunities presented by the Bahrain’s aviation sector, as well as those of the wider region, Mumtalakat recently established Falcon Holding to consolidate its various assets within the sector. “Across the Gulf we are seeing increasing economic integration, driving trade within the GCC, and greater connectivity to markets in Europe, Asia and Africa. The region’s dynamic demography also means that there is a young, rapidly growing and increasingly affluent population. This means more people travelling around the region for businesses and pleasure – and a need for the aviation hubs and aircraft that can connect them,” says Mr al Kooheji.

Looking ahead, Mumtalakat also has an eye on investment opportunities beyond the Bahrain and the GCC markets. This falls under the fund’s wider strategy of doubling its assets under management, which reportedly stood at $6.4bn in April this year, within the next seven years. “We can bring long-term capital, hands-on experience of having worked closely with the management of a number of businesses and a high level of understanding of the Middle East region, and we are finding that businesses and investors are increasingly recognising the value that we can bring,” says Mr Al Khooheji.

To the extent that the GCC region is emerging as a preeminent trading, investment and transportation hub, with ever greater exposure to the ebbs and flows of global markets, Mr Al Kooheji sees little implications for Mumtalakat in the recent slowdown of the Chinese economy.

“It’s too early to say with any certainty what the impact on the global economy would be from any prolonged slowdown or economic readjustment in China," he says. "However the recent drop in the Chinese markets and growth figures does not immediately impact on the composition of our portfolio because in making investment decisions, we focus on the long term, rather than short-term peaks and troughs of markets. Also, our funds are mainly deployed in direct investments rather than in equities.”


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