State General Reserve Fund (SGRF): What It Is, How It Works

What Was the State General Reserve Fund (SGRF)?

The term State General Reserve Fund (SGRF) referred to a sovereign wealth fund (SWF)established by the Sultanate of Oman in 1980. The fund was created to manage the investments of Oman's revenues, with the objective of ensuring the country's economic stability and sustainable development, and was administered by Oman's Ministry of Finance. The Arab nation's principal export and, therefore, primary revenue driver is oil. The SGRF was combined with the Oman Investment Fund (OIF) in 2020 to create the Oman Investment Authority (OIA) by royal decree.

Understanding the State General Reserve Fund (SGRF)

Oman's Ministry of National Economy considered the establishment of the SGRF as the most prominent achievement of the nation's first five-year development plan. This plan covered the period from 1976 to 1980. This timeframe coincided with a boom in the world's oil prices. At the time, oil supplies dropped, causing panic, demand to rocket, and prices to rise dramatically.

The sovereign wealth fund invested the financial surplus forwarded to it and aimed to do the following:

• Maximize investment revenues and administer them in a way that minimized risk
• Make investments and earn revenue by distributing its risk criteria
• Strategically direct investment for the long-term
• Attract international investments
• Promote and develop local investments
• Promote economic development in Oman

The fund's investment portfolio was diversified across 25 countries, with a wide range of sectors in addition to strategic investments to ensure sustainable long-term returns. Its investments included tradable assets in the public market, such as global equity, fixed income bonds, and short-term assets.

The SGRF also invested in private, non-tradable assets, such as private real estate investments, logistics, commercial and industrial projects as well as other services. For instance, the fund acquired a 30% stake in Corporate Commercial Bank—Corpbank for short—Bulgaria's tenth-largest bank in terms of assets. The acquisition was completed in January 2009 for an undisclosed sum.

Special Considerations

The SGRF was officially dissolved after it was merged with the OIF and the Directorate General of Investments at the Ministry of Finance by royal decree in June 2020 to form a new legal entity called the Oman Investment Authority (OIA). The move consolidated the country's sovereign wealth funds under a single organization at a time when Oman was under intense fiscal pressure from low oil prices.

The fund's assets were estimated at more than $14.3 billion at the time of the merger, while the OIF was valued at $3.4 billion, according to a report from Pensions and Investments. The assets and employees of each were transferred to the new organization.

The newly formed OIA's objectives remain the same as the SGRF. It invests in more than 35 different international markets, allocating anywhere between 65% to 85% in publicly-tradable assets, with the remaining portion being invested in private ventures.

The primary area of investment for the OIA lies in Europe, followed by the Asian and African markets. Limited investments are held in South and North America as well as Australia.