Recent reports in local newspapers have indicated a potential transfer of funds managed by the Public Authority for Minors’ Affairs and the General Secretariat of Awqaf to the General Investment Authority. As someone familiar, albeit to a limited extent, with the investment mechanisms of these institutions, I felt compelled to share my insights, which might prove beneficial. For now, let’s focus on the Public Authority for Minors’ Affairs. My first encounter with their investment accounts dates back to 1995, when the esteemed Abdulmohsen Al-Mijhem, the General Manager at the time, assigned me the task of devising an investment strategy. Out of my keen interest in the institution, I volunteered for the project, undertaking in-depth analysis and evaluation. To provide context and clarity, I will outline the structure of the investment portfolio as it stood in 1995. It’s worth noting, however, that the composition may have evolved over time. The funds under the authority’s management are directly invested in its name under a collective investment fund or a similar entity. However, it is essential to clarify that the term “fund” might be slightly misleading. The legislative intent behind the establishment of the authority was to ensure that the invested funds of minors are safeguarded from any risks, despite being privately held. When the authority assumes guardianship over a minor or other individuals under its care, only the liquid assets are transferred to this account (referred to as the “fund”). Real estate properties, on the other hand, remain registered under the minor’s or beneficiary’s name and are managed by specialized real estate firms on behalf of the authority. The cash surplus, after meeting the minor’s needs, is directed to the “fund” for investment. The authority also retains a portion of the funds as cash or deposits to cover inflows, outflows, and beneficiaries’ needs. Within the fund, investments primarily consist of a substantial stake in Kuwait Finance House (KFH) shares. Since the foundation of KFH, the authority has maintained approximately a 9% ownership stake, which it has preserved over the years, ensuring a seat on the board of directors. This ownership forms the backbone of the authority’s investments and serves as its primary source of income—often described as “the goose that lays the golden egg.” The portfolio also includes holdings in other companies, as well as deposits and bonds. As for real estate, the authority’s involvement dates back to the late 1970s, when it entered into co-ownership agreements in areas such as Messila, Fintas, Granada, and Mahboula. This was before these areas were organized by the state, with land prices then being around two Kuwaiti dinars per square foot. A decade and a half later, these plots were developed, leading to the authority acquiring numerous residential and investment plots. Over time, the authority liquidated a significant portion of these assets through public auctions, generating substantial profits. The proceeds were partially reinvested into cash reserves and income-generating real estate through development or acquisition. Over the past 15 years, the authority has managed to distribute an average annual cash return of approximately 13% to its beneficiaries. Additionally, the market value of these investments significantly exceeds the entitlements of the minors and beneficiaries under its care. Regarding the proposal to transfer the management of these assets to the General Investment Authority, I believe this step could create operational challenges for both entities. The nature of the authority’s work involves daily financial inflows and outflows, some of which are predictable, while others are not. This dynamic necessitates the General Investment Authority to ensure the availability of required funds, which might involve administrative delays. Historically, there has never been an issue with the minors’ funds meeting their financial obligations on time. However, introducing a secondary party could complicate administrative and accounting processes for both entities. Moreover, 90% of the authority’s investments are long-term and strategic, and transferring them to the General Investment Authority could incur additional fees without any significant added value. From my perspective, a balanced solution could satisfy both the minors’ needs and the government’s desire for secure investments. While the Public Authority for Minors’ Affairs might require additional expertise in investment management, priority should first be given to enhancing the capabilities of its current team. The General Investment Authority could also play an advisory role by appointing a representative on the investment committee or even the board of directors. This representative could review and approve investment policies, examine financial statements and periodic budgets, and provide feedback and recommendations. Such a collaborative approach would ensure the minors’ investments remain under careful stewardship while aligning with sound investment practices. By implementing these measures, the Public Authority for Minors’ Affairs can maintain its robust financial management while meeting the government’s expectations for transparency and security.
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