Arabian Gulf investment funds are taking an extremely cautious approach in their future investment strategies, according to leading industry observers.

The funds were collectively managing asset portfolios worth over $1.25 trillion before the global market slowdown.

"The falling price of oil, domestic politics and the uncertain international investment climate are having an obvious and heavy influence on how the wealth of the Gulf region is allocated – both at home and abroad," said Jeremy Butcher, co-director of the Global Alternative Investment Management Middle East conference, which will take place at the Dubai International Convention and Exhibition Centre from November 16 to 19, 2008.

Some of the most influential business people in the Middle East will be participating in GAIM Middle East and more than 60 international and regional speakers have been lined up to identify investment opportunities.

GAIM Middle East, jointly organised by IIR Middle East and IIR USA, has also received high-level support including Shuaa Asset Management as founding sponsor; Global Investment House as platinum sponsor; The National Investor as gala dinner sponsor, among others.

According to a recent report by the Roubini Global Economics (RGE), investment funds of the Gulf Co-operation Council countries represented over half of sovereign wealth funds worldwide.

Oil revenues, investment returns and leverage had swollen their assets to over $1 trillion during 2007 in portfolios heavy on equity and alternative investments.

Prior to the global stock market decline, RGE had estimated the funds would manage well over $1.25 trillion by the end of this year.

In addition to the market declines, the fall in the price of oil will also influence GCC spending. In recent years GCC budgets had been expanding cautiously after the overspending of previous oil booms. The recent retreat in oil prices may cause governments to cut spending in 2009.

The International Monetary Fund recently said the breakeven price for Saudi Arabia is the highest among the GCC countries because they are spending on a lot of projects right now with oil money being used to fund them.

IMF reckons Saudi Arabia will need crude prices to remain above $49 a barrel to avoid a fiscal deficit.

"GCC funds have been among the most active globally in recent years but even before the market meltdown and oil price reversal there were increasing signs that they were not taking part in as many acquisitions and recapitalisations," said GAIM Middle East co-director Julia Wilson.

"Like many other investors, the investment funds are now being cautious and perhaps rethinking previous strategies. But even with falling oil prices and an uncertain global environment, the challenge of investing the proceeds of the region's growth will remain."

Participants in the GAIM Middle East event are drawn from senior circles and include high net worth investors; family offices; sovereign wealth funds and government investment offices; funds, endowments and foundations; portfolio, fund and investment managers; investment bankers; brokers; law and accounting firms; government executives and finance ministers.

About 60 per cent of delegates come from the Arabian Gulf.

"There could not be a more important time for investors to take stock," Butcher said.

GAIM Middle East includes detailed assessments of the world financial market turmoil and its implications and opportunities for Middle East investors.

Volatility and liquidity will also be examined in great detail along with the future for environmentally driven investing; real estate dilemmas; opportunities in real assets such as commodities, agriculture and infrastructure; as well as event-driven strategies for dealing with dislocated markets.

GAIM Middle East will host the second annual Middle East Business Achievement Award