#SaudiArabia, #Kuwait-Backed Wealth Fund to Sell Assets in Private Markets Pivot - Bloomberg

Saudi Arabia, Kuwait-Backed Wealth Fund to Sell Assets in Private Markets Pivot - Bloomberg

Wealth funds aren’t generally known for making sudden strategic changes that upend their investment models. A little-known Middle Eastern investor is deviating from that thesis, with plans to sell all $1.2 billion of its legacy assets as part of a pivot toward private markets.

The move stems from an existential choice that The Arab Investment Co. — one of the Middle East’s oldest state-backed investors — faced a little over a year ago. At the time, its bosses had to choose between shutting down the firm after half a century or overhauling strategy.

Ultimately, they turned to a former State Street Corp. executive to engineer a turnaround at TAIC, whose portfolio is largely made up of short-term lending and letters of credit, low-risk holdings in government bonds and treasury bills.

Abdullah Bakhraibah, who took over as chief executive officer last year, has since embarked on a quest to reallocate most of that to private markets, with about 40% going to public equities and some to venture investments.

“We are literally in exit mode across our entire portfolio,” Bakhraibah told Bloomberg News, saying that he intends to focus on sectors like health care, education, and industrials. The fund is also eyeing tactical bets on technology and artificial intelligence, with a goal of boosting returns to 9% from an average of about 5% in recent years.

It’s already begun shifting money into public and private markets, and plans to exit its current portfolio companies to make room for fresh investments, Bakhraibah said.

That shift would mirror a broader trend among Gulf state-backed funds looking to diversify portfolios and capture higher yields. Many of these entities play an important role in their countries’ efforts to diversify and have splashed out billions of dollars across industries to support that quest.

Saudi Arabia’s Public Investment Fund, for instance, invests across a swathe of sectors from technology and sports to gaming. Over in the United Arab Emirates, Abu Dhabi is home to three wealth funds that have been branching out into pockets of finance including private credit.

In a region awash in sovereign wealth — at least $4 trillion between the main investors — TAIC is an unusual entity. The Riyadh-based firm is overseen by 17 Middle Eastern countries, each typically weighing in on decision making.

In a wide-ranging chat, Bakhraibah shone a light on the fund’s operations. Founded in 1974 as one of the region’s earliest sovereign wealth funds with initial capital of $60 million, TAIC counts Saudi Arabia and Kuwait among its largest shareholders. Its board is chaired by Saad bin Abdulaziz AlKhalb, CEO of Saudi EXIM Bank, and includes representatives from other countries.

Bakhraibah, who previously led State Street’s operations in Saudi Arabia, said his fund is targeting at least 20 new transactions this year across its shareholder countries, while exploring partnerships with both regional and global asset managers.

Some deals might come in conjunction with Middle Eastern wealth funds, including Kuwait and Saudi Arabia’s $1 trillion behemoths, he added.

“We’re becoming commercially-driven investors,” Bakhraibah said. “Returns are our top priority.”