Sovereign wealth funds from Saudi Arabia and the UAE are expanding across markets such as Russia, China, India and Latin America to mitigate risks of uncertainty.
Experts attending the three-day Future Investment Initiative (FII) conference in Saudi Arabia identified uncertainty due to fast-changing technologies and geopolitical tensions as one of the biggest challenges for businesses and societies around the world. Additionally, many of these new technologies are being used by the finance sector to break geographical barriers.
Slowing of GDP growth in the UAE and Saudi Arabia can be mitigated through diligent global investments by cash-rich sovereign wealth funds (SWFs) from Saudi Arabia and the UAE, according to the speakers at the opening session on investments.
Yasir Al-Rumayyan, Head of the Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund, and Khaldoon Khalifa Al Mubarak, CEO of Abu Dhabi’s Mubadala Development Company, said that spreading investment capital to different geographies is the best way to ensure sustainable returns and lower risks.
Mubadala has invested in Russia, China and Latin America to expand into different geographies, according to Al Mubarak. “Building trust is very important in new markets, and when we invested in 43 projects in Russia along with the Russian Direct Investment Fund [Russia’s SWF], the positive outcome enhanced our trust in that market to expand our projects.”
One of the major ongoing trends is collaboration among like-minded SWFs around the world to invest in new markets. This collaborative investing not only enables higher returns but also helps spreading out of risks.
With assets worth $320 billion under its management, the PIF has become very aggressive since 2015, and its size has doubled. About 20 percent of the fund’s revenues are attributed to its international investments. With its robust expansion plans, PIF is expected to reach a target of $400 billion in assets by the end of 2020.
To invest in growth markets across the world, the PIF has partnered with funds such as Blackstone and Softbank’s Vision Fund. For Al-Rumayyan, the current business environment is more complex than 15–20 years ago as it now involves knowledge-sharing and building trust. He said that partners who have local knowledge are ideal when investing in international markets; conversely, expertise can also be offered to international investors who show interest in the Middle East. “It’s a win-win situation for all, but trust is very important.”
Al-Rumayyan, who is also the chairman of Saudi Aramco, said developing local talent in skills aligned with new technologies would help build a sustainable economy. The PIF is working with the global partners and has established the Future Investment Initiative Institute to educate local talent.
Al-Rumayyan stressed Saudi Arabia’s major role in the global economy as a market and as an international investor. Mukesh Ambani, head of India’s Reliance conglomerate, agreed. The conglomerate is working closely with PIF to invest in Saudi Arabia and is facilitating PIF’s projects in India
“What China experienced in 1980s and India experienced in early 1990s owing to economic liberalisation Saudi Arabia is [now] witnessing in terms of opening its economy and investing in assets abroad,” Ambani said.
“Collaborative investing” was the buzzword during the first few sessions of the FII conference, the third since the event’s launch in 2016.
According to the organizers, 300 speakers from more than 30 countries and 6,000 top executives from around the world are attending this year’s conference. The FII event is among the top three business gatherings in world, and its size has doubled since the first time it was held.
Among the attendees are India’s Prime Minister Narendra Modi and Jared Kushner, Senior Advisor to the US President, as well as CEOs of firms such as Goldman Sachs, HSBC Holdings, Blackstone, and the Russian Direct Investment Fund.
(Writing by Syed Atique Naqvi, editing by Seban Scaria email@example.com)
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