Sedco, founded in 1976, has offices across the world, in Dubai, London and Luxembourg, giving it a view across global publicly listed and private asset sectors.
After two decades in financial services, Abu Aker joined the company in 2011 after Sedco was relaunched as a standalone asset management group.
The current Sedco focus is more on developed markets, with the US a favorite as American asset classes have responded well to pandemic stimulus packages that curtailed its recession.
The US government provided almost $6 trillion in coronavirus relief, while the Federal Reserve slashed its overnight benchmark overnight interest rate to near zero and is pump money into the economy through monthly bond purchases.
Last year, Sedco invested in what Abu Aker calls “jewel” real estate assets in Pennsylvania Avenue, home to the White House, in the heart of Washington DC.
The (coronavirus disease) pandemic presented opportunities, he said.
The money manager said: “Definitely it has shifted the position of our portfolios over the course of the last 18 months.
“For example, while we have maintained a strategic asset allocation based on our views on different economies and the different markets, with the pandemic coming into play we have seen the more active role of the US government both on the monetary side but also the robust fiscal spending that they have that they have put in place.”
Sedco is also actively involved in other big markets, in China and in Europe, for example, to take advantage of economic recovery as vaccines are rolled out round the world.
“As the global cycle marches on through the latter part of the year, led by developed countries, chances are that investors’ preferences might change as the worst news is priced in and valuations become more appealing,” he said.
The firm said in its August monthly bulletin that pressure on the supply of goods caused by pandemic bottlenecks “should eventually subside in the second half of 2022 as economic mobility in the US and Europe eventually decouples from the spread of the delta variant.”
But the firm adds that it does not expect core prices in these markets to quickly return to “pre-pandemic levels as a result of more fundamental forces at play,” such as wage growth.
Investors have cast a close eye on China’s crackdown on the tech sector and other industries this year, which has seen billions in fines handed out after antimonopoly investigations.
This regulatory campaign from Beijing has wiped as much as $1.5 trillion from Chinese stocks.
But Abu Aker said: “While we still retain a cautious exposure on emerging markets as a whole, we are closely watching China as it is our belief that the authorities don’t mean to cross the line of losing foreign investors’ trust. Overall, we see positive prospects in Asia.”
But Sedco remains a Saudi Arabia-based firm, and investment in the Kingdom will always be a big focus. He thinks the government measures taken during the pandemic have made it a more attractive place to invest.
The Kingdom’s second-quarter economic data showed growth of 1.1 percent quarter-on-quarter. The oil sector grew by 2.5 percent quarter-on-quarter on the back of the unwinding of the 1 million billion barrels per day voluntary output cut that lasted from February to April.
Abu Aker said: “If you would speak to any of the managers and investment companies in Saudi Arabia you will hear nothing but positive surprises from the actions and the role that the government has played.”
“We’ve never felt that there’s any lack of liquidity within the banks. They are still rich in cash, and the central bank has supported them with all the liquidity they need to support the economy, both on the government side and in the private sector.”
He added: “We have seen a good rebound as well on the residential real estate side, and this is mainly driven by structural reforms where the government has been promoting Saudi home ownership and of course mortgages.”
Other government policies will also affect investment sentiment in coming years. The move to encourage multinational companies to have their regional headquarters in Riyadh is a positive one, Abu Aker said.
“I don’t think those multinational companies should have waited for such an announcement to come out from the Saudi government for them to actually make the move. I think today if we look at the Saudi market, it is the largest market not only in the GCC but it is also one of the largest markets in the Middle East,” he said.
Sedco also believes that the $3.2 billion Shareek initiative, launched in March, to stimulate greater private sector investment in Vision 2030 projects will pay dividends.
The chief executive said: “I think it’s one more step toward engaging the government more with the private sector and increasing the ties between the government and the private sector.”
“It’s going to avail more financing, more grants to corporates and to the private sector to allow them to capture some of the opportunities they could not get funding for through the normal channels.”
The core of Sedco’s investment philosophy lies in the complementarity between Shariah principles and the current enthusiasm for ESG — ethical, social and governance — investment practice.
“We have run our own internal analysis and research, and the interesting finding that we came up with is that there’s a lot of commonalities between the Shariah guidelines and ESG — environmental, social and governance — or ethical investing.”
Shariah and ethical guidelines overlapped 90 percent of the time, he said, making “one unified investment philosophy” that helps set Sedco’s investment strategy.
“We don’t just talk the talk, we also walk the walk,” Abu Aker said.
The Sedco investment philosophy is not just governed by Shariah’s conventional stance of refusing to invest in sectors, such as tobacco, alcohol or gambling, that are frowned upon under Islam, but also by a wider commitment to prudent, ethical financial principles.
The firm signed up to the UN Principles for Responsible Investment charter six years ago, the first Saudi firm to do so.
Abu Aker sees no conflict in being a Saudi institution, based in an economy that is still mainly driven by oil revenues, and espousing ESG standards when some in the global financial industry are steering away from hydrocarbon assets on ethical grounds.
He said: “Saudi Arabia is shifting toward cleaner energy, even though oil will continue to be an important component of our economy.”
“But we understand that the future is more toward alternative and cleaner energy. Right now, it’s a transitional period, and it will take some time, but it’s heading in the right direction.”