Producers are exacerbating the global market rout, according to David Zervos, chief market strategist at New York- based Jefferies LLC. At the current crude price, commodities countries have "entered the phase where the excess savings glut is being replaced with an excess selling glut," he said in a note to clients this week.
In Chile, the state-owned stabilization fund has seen its assets fall to $14 billion at the end of last year, from a peak of $15.5 billion in 2014. The foreign-exchange reserves of Azerbaijan have fallen to $7.3 billion, less than half the $16.5 billion of mid-2014. Nigeria hasn’t tapped its small sovereign wealth fund -- but the country has burned through the reserves controlled by the central bank. They’ve fallen to $28.7 billion, down from a peak of $48 billion in mid-2013.
Losing Money
The funds’ chiefs are under pressure. The head of the sovereign wealth fund of Kazakhstan was fired earlier this month after he told The Wall Street Journal the vehicle will run out of money in seven years as oil prices cut its revenue. Algeria, one of the world’s top natural-gas exporters, has over the last year burned through the reserves it took nearly four years to accumulate, according to data compiled by Bloomberg.
Saudi Arabia, the world’s largest oil producer, is a prime example of the swiftness and magnitude of the reversal: its foreign-exchange reserves have fallen more than $100 billion since mid-2015, to $635 billion, according to data from the Saudi Arabian Monetary Agency. The drop is larger than in 2008-2009, during the global financial crisis.
Riyadh managed most of these petrodollars as foreign exchange reserves under the control of the central bank. The kingdom has in the past suggested it may create a sovereign wealth fund similar to those in neighboring Kuwait and Qatar to manage a portion of the money. Reuters reported last week that the nation is seeking proposals from investment banks and consultants.
The retrenchment is uneven. The wealth funds of other oil countries such as Kuwait, United Arab Emirates and Qatar show little sign of shrinking, with their funds still buying assets. The sovereign wealth fund of Norway has stopped growing, but hasn’t seen a drop in assets. The fund, the world’s largest, had about 7.02 trillion kroner ($800 billion) at the end of September 2015, little changed from the beginning of the year.
Governments and managers of eight commodities-rich countries and their funds either declined to comment or didn’t reply to questions.
Few industries are more affected than asset management, whose bosses are heavily represented at Davos. A turnaround isn’t in view any time soon, said Martin Gilbert, chief executive of Aberdeen Asset Management Plc.
"What we do know though is, if the oil price remains low, we’re going to see more redemptions, I would say, from government institutions," Gilbert told investors in November. That month, Aberdeen reported $19.1 billion in net outflows in its fiscal fourth quarter as crude-exporting countries, among other investors, pulled out.