Flush with cash from an energy boom, Saudi Arabia and other Gulf monarchies have a moment on the world’s financial stage
5 min
Five years ago, Saudi officials watched a wave of American finance executives pull out of a free investment confab in Riyadh after the murder of a dissident journalist made the kingdom a toxic place to do business.
This year, the conference, nicknamed “Davos in the Desert,” is expecting so much demand it is charging executives $15,000 a person.
Middle East monarchies eager for global influence are having a moment on the world’s financial stage. They are flush with cash from an energy boom at the very time traditional Western financiers—hampered by rising interest rates—have retreated from deal making and private investing.
The region’s sovereign-wealth funds have become the en vogue ATM for private equity, venture capital and real-estate funds struggling to raise money elsewhere.
The market for marquee mergers and acquisitions has seen a surge of interest from the region. Recently announced deals include an Abu Dhabi fund’s purchase of investment manager Fortress for more than $2 billion and a Saudi fund’s $700 million purchase of global lender Standard Chartered’s aviation unit.
Companies and funds overseen by Abu Dhabi’s national security adviser, Sheikh Tahnoun bin Zayed Al Nahyan, have made runs at buying Standard Chartered and investment bank Lazard. They have also struck recent deals to buy a $1.2 billion U.K. healthcare company and to take partial control of a nearly $6 billion Colombian food giant.
“Now, everybody wants to go to the Middle East—it’s like the gold rush in the U.S. once upon a time,” said Peter Jädersten, founder of fundraising advisory firm Jade Advisors. “It’s difficult to raise money everywhere.”
Fund managers visiting the region say they often wait across from rivals in waiting rooms of sovereign-wealth funds. Silicon Valley and New York managers are a near-constant presence in the white-marble floored lobby of the Four Seasons Abu Dhabi, as with other top hotels, they say.
The Riyadh conference next month—a pet project of Saudi Crown Prince Mohammed bin Salman known as the Future Investment Initiative—is expected to be a magnet for money hunters. In 2018, Wall Street executives backed out after Saudi operatives murdered journalist Jamal Khashoggi, and for years many startups and funds said they avoided investment from the country over moral concerns.
Some companies continue to steer clear of the kingdom, while human-rights groups say its record on treatment of government dissidents remains a serious problem.
But Saudi funding became more in demand last year when other money began to get tight. At last year’s conference the Public Investment Fund’s chief, Yasir Al Rumayyan, sat on a panel discussion with two of the world’s biggest investment-firm executives, Blackstone’s Stephen Schwarzman and Ray Dalio, founder of Bridgewater Associates. Top names in venture capital mixed on the floor, and FTX chief Sam Bankman Fried looked for funding.
Ben Horowitz, partner at Andreessen Horowitz, said at a PIF-sponsored conference this spring that Saudi Arabia was a “startup country,” and referred to Prince Mohammed as its “founder” who was creating a new culture and new vision for the country.
The region’s new dominance is most apparent among private funds, the type that lock up investors’ money for years. While detailed statistics are scarce, figures at two of the biggest sovereign funds suggest a surge. At Saudi’s PIF, commitments for “investment securities”—a category that includes private funds—rose to $56 billion in 2022, up from $33 billion a year earlier. Abu Dhabi’s Mubadala reported that equity commitments doubled to $18 billion in 2022.
Executives at private-equity giants TPG, KKR and Carlyle Group have told investors that interest from the Middle East remains strong while other parts of the world recede.
“If you’re in the U.S., there’s a certain degree of concern,” Carlyle CEO Harvey Schwartz said at a June conference. Middle East investors, he said, are “very front-footed, very dynamic.”
While the Middle East steps on the gas, the traditional backers of investment funds—pension plans and college endowments—are in retreat. The global shift to higher interest rates caused losses in the biggest parts of their portfolios—especially stocks and bonds.
Investors put $33 billion toward U.S.-based venture capital funds in the first half of 2023, less than half the $74 billion in the same period in 2021, according to PitchBook. Global fundraising for all private funds fell 10% last year to $1.5 trillion, according to Preqin—a decline many expect to continue.
“Fundraising has become much, much harder over the past 12 months,” said Brenda Rainey, an executive vice president at Bain & Co. who advises private-equity funds.
The reason for the region’s burst of funding and deal making is twofold.
Higher energy prices—a byproduct of Russia’s invasion of Ukraine—have given the region’s oil- and gas-dependent wealth funds tens of billions of dollars of extra money to spend. That means a drop in oil prices could quickly cause a pullback from the Gulf countries, as has happened in energy booms-turned-bust of the past.
At the same time, Saudi Prince Mohammed and top officials in the U.A.E. have jostled for greater sway on the world stage—in geopolitics, finance and sports—pumping additional money into their wealth funds to do deals and expand industry at home.
The intersection of politics and finance in the region has led Gulf wealth funds from Saudi Arabia, the U.A.E. and Qatar to be the main financial backers of two key Trump administration figures: Jared Kushner and former Treasury Secretary Steven Mnuchin, who together raised billions of dollars from the region.
Gulf funds have pushed their U.S. peers to open offices in the region to more easily win investments, fund managers say.
BlackRock has said it would create a team on the ground in Riyadh dedicated to boosting investment into infrastructure projects in the Gulf.
Millennium Management LLC, based in New York, set up an office in Dubai in 2020 and others followed, including private-equity firm CVC Capital Partners and ExodusPoint Capital Management, the largest-ever hedge-fund startup with $8 billion in initial capital. Europe’s Tikehau Capital and Ardian both established teams in Abu Dhabi, and U.S. alternative investment manager, Pretium, hired a local industry veteran from Dubai.
Dalio also set up an office in Abu Dhabi for the Dalio Family Office, his personal venture. Rajeev Misra, a longtime financier for SoftBank Groupwho secured over $6 billion in commitments for a new venture from multiple Abu Dhabi-aligned investment funds, is moving to the U.A.E. from the U.K., according to people familiar with his plans.
There is now an “awareness that relationships have to be built and that doesn’t happen overnight,” said Joseph Morris, a Dubai-based managing director at U.S.-based advisory firm Newmark Group.
The venture capital arm of Tiger Global has struggled to raise its latest fund, repeatedly cutting its target by billions of dollars. Stung by losses and the cooler fundraising environment, many U.S. investors have given it the cold shoulder, investors say.
One place it found success: Saudi Arabia. A division of PIF, Sanabil, this spring added Tiger’s name to the public list of fund managers it backs. Others on the list include Peter Thiel’s Founders Fund and Andreessen Horowitz.
Ibrahim Ajami, who oversees startup investments at Abu Dhabi state fund Mubadala, which invests in companies as well as funds, said the environment gives Mubadala the ability to be “very thoughtful and selective” about who it backs.
He can negotiate terms that let Mubadala buy a stake in the fund manager itself, he said, or allow it to invest alongside others.
“What we are doing is going deeper—and more concentrated and more engaged—with a select group of managers,” he said.
—Summer Said and Berber Jin contributed to this article.
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What a quarter-million dollars gets you in the western capital.
Alexandre de Betak and his wife are focusing on their most personal project yet.
A new study finds that is particularly true for people nearing retirement.
2 min
Feeling depressed when the stock market is down? You have plenty of company. According to a recent study, when stock prices fall, the number of antidepressant prescriptions rises.
The researchers examined the connection by first creating local stock indexes, combining companies with headquarters in the same state. Academic research has shown that investors tend to own more local stocks in their portfolios, either because of employee-stock-ownership plans or because they have more familiarity with those companies.
The researchers then looked at about 300 metropolitan statistical areas, which are regions encompassing a city with 50,000 people and the surrounding towns, tracking changes in local stock prices and the number of antidepressant prescriptions in each area over a two-year period. They found that when local stock prices dropped about 12.8% over a two-week period, antidepressant prescriptions increased 0.42% on average. A similar relationship was seen in smaller stock-price drops as well. When local stock prices fell by about 6.4%, antidepressant prescriptions increased about 0.21%.
“Our findings suggest that as the stock market declines, more people experience stress and anxiety, leading to an increase in prescriptions for antidepressants,” says Chang Liu , an assistant professor at Ball State University’s Miller College of Business in Muncie, Ind., and one of the paper’s co-authors. The analysis controlled for other factors that could influence antidepressant usage, like unemployment rates or the season.
In a comparison of age groups, those aged 46 to 55 were the most likely to get antidepressant prescriptions when local stocks dropped.
“People in this age group may be more sensitive to changes in their portfolio compared with a younger cohort, who are further from retirement, and older cohorts who may own less stocks and more bonds since they are nearing retirement,” says Maoyong Fan , a professor at Ball State University and co-author of the study.
When the authors looked at demand for psychotherapy during periods of declining stock prices their findings were similar. When local stock prices dropped by about 12.8% over a two-week period, the number of psychotherapy visits billed to insurance providers increased by about 0.32%. They also found a correlation between local stock returns and certain illnesses associated with depression, such as insomnia, peptic ulcer, abdominal pain, substance abuse and myocardial infarction. But when the authors looked at other insurance claims, like antibiotics prescriptions, they found no relationship with changes in local stock prices.
By contrast, for periods when stocks rise, the authors didn’t see a drop in psychological interventions. They found no statistical relationship between rising local stock prices and the number of antidepressant prescriptions, for example, which the authors believe makes sense.
“Once a patient is prescribed an antidepressant, it’s unlikely that a psychiatrist would stop antidepressant prescriptions immediately,” says Liu.
One practical implication of the study, Liu adds, is that investors should be aware of their emotional state when the market dips before they make investment decisions.
