Persian Gulf Arab institutions are likely to boost hedge fund investments this year as they seek to diversify assets and stabilize returns, according to Investcorp Bank BSC of Bahrain, which manages $12bn.

The Gulf Arab region pumps more than 20 percent of the worldâ??s crude oil and is home to some of the worldâ??s biggest sovereign wealth funds. The Abu Dhabi Investment Authority managed an estimated $328bn at the end of 2008, the Kuwait Investment Authority $228bn and the Qatar Investment Authority $58bn.

Sovereign institutions, including those that invest in Investcorpâ??s funds, typically allocate 5 percent to 10 percent of their assets to alternative investments.

Gulf Arab clients have put $1.3bn into Investcorpâ??s hedge fund assets, and the firm has invested an additional $1bn, Investcorp said in a presentation yesterday.