The head of one of the world's leading sovereign wealth funds said at Davos today that there were bargains to be had but it was too early to make major long-term purchases as the global financial crisis was going to get worse.

Asset prices were at very reasonable levels but it was still to early to make big bets on long-term investments, said Sameer al-Ansari, the chief executive of the $13 billion Dubai International Capital.

Speaking on the sidelines of the annual meeting of the World Economic Forum, Mr al-Ansari said that the sovereign fund could see opportunities but remained nervous of markets as the financial system was “broken”.

“There (is) going to be a great opportunity in the next year or two to acquire assets at historically unprecedented levels,” said Mr al-Ansari.

“The region has to invest for the long term... choosing assets that represent good value for the region.”

However, he added: “We’re still very nervous about making some big bets - we see the financial crisis getting worse. There’s not going to be a magic wand solution to the problem.

“The system as we know it is literally broken. We have to get money flowing again, we have to get liquidity flowing again, we have to get confidence back. That’s going to take time, that’s going to take two, three, four years.

“In the meantime the world is going to (get) poorer, standards of living are going to get worse and it’s not going to be pleasant.”

DIC, which is owned by the ruler of Dubai and controls around $13 billion in assets, is one of the group of Gulf Arab funds and investment vehicles to have lost billions in the financial crisis through stakes in top Wall Street firms.

The managing director of Malaysia’s strategic investment fund agreed with Mr al-Ansari, saying that sovereign wealth funds were likely to avoid major investments for at least six months as the global financial crisis played out.

Azman Mokhtar, Managing Director of Khazanah Nasional Berhad, said the next six-to-nine months would be very difficult for sovereign funds, not least because of the pressure for domestic accountability.

“Many sovereign wealth funds will be hunkering down, certainly in the first six months of this year,” he said at Davos.

During a discussion on global economic imbalances, Mokhtar said he hoped there would not be a wholesale exit from the likes of US Treasury bonds - if only in the interests of global equilibrium.

“I hope there will not be a big pull out from lending to super borrowers (like the US Treasury), because of the global consequences. The need for equilibrium is clear.”

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