00:00When it comes to sovereign wealth funds in the region, some of the richest in the world,
00:04what are the trends that have been set since those geopolitical tensions have been flared?
00:09The sovereign wealth fund landscape as a whole, and sovereign wealth funds in particular,
00:13they're sophisticated long-term investors, so this is not something new for them.
00:17They're stepping a bit aside from just being capital allocators to being real strategic
00:23partners in terms of co-investments, in terms of the different themes that they're investing in.
00:27What is important as we look at is to look at the sovereign wealth fund in the landscape
00:31of a much more longer-term investors versus short-term tactical movers.
00:35So would you say that they've turned, surely they are long-term investors,
00:39but would you say that their strategy now is turning more defensive or allocating towards those
00:45hyped-up sort of fields like AI and some of the hyperscalers?
00:50Absolutely. I mean, economic diversification continues to be one of the main objectives
00:53of the sovereign wealth funds, and here within the Gulf, we have been seeing it.
00:57more and more within several of these sovereigns.
01:00So as we look at that economic diversification, it is important to look at the themes that
01:05will yield longer-term or stabilized return for the long-term, and that's where some of
01:10the themes that you've just mentioned come into place.
01:12Okay. And so I mentioned the 13F filings, and of course we monitor the PIF's activity
01:17throughout the quarters. What caught your attention when it comes to Saudi Arabia, especially
01:22that the PIF is such a headline grabber every time those disclosures come in.
01:27Absolutely. I mean, it is within the PIF. It is interesting what they're doing, and it
01:31shows the evolution of the fund from just being a long-term investor to having the objective
01:39of economic diversification under Vision 2030. So within that context, we should look beyond
01:45just one number or one snapshot of time to what actually the PIF is doing from both long-term,
01:51from both international as well as local investing.
01:53So when it comes to local investing, of course, Saudi Arabia has seen a flood of news over the
01:59past few years about those major projects that it's now downsized, and the PIF's involvement
02:05there as well. Do you think that the PIF is going to follow that strategy of focusing
02:10in on its domestic investments going forward?
02:14So balancing domestic as well as international investments continue to be one of the main
02:20objectives of a sovereign. And within the PIF, we're seeing them doing that in terms of creating
02:25that balance across both local as well as international investments and what makes sense
02:29for them from an economic transformation perspective.
02:31Okay. And so when it comes to the general picture, we're talking about the ADIAs, the Mubadilas,
02:35the PIFs, and the QIAs. Do you see, I know that we spoke about the long-term vision
02:40of the nature of how these funds operate, but then the geopolitical situation in the
02:45Middle East, do you think that that's turned them towards more U.S. exposure, generally
02:51speaking, aside from talking about the PIF and its domestic interests?
02:55Given the short-term angle of what we're dealing with, it's very hard to say from a long-term
02:59perspective whether that is going to result in a strategic asset allocation shift or not.
03:04What we know is that the Gulf region has deep, deep, deep balance sheets. And so far, the
03:12economies have been very resilient in terms of what is happening locally. So you've seen
03:16that within the capital allocations that has been happening. You see that in terms of capital
03:20flow that the sovereigns have been putting into the system. So it is hard to tell on a
03:24short-term perspective what could that result or yield in.
03:27Okay. So given everything you just mentioned to me, Wael, if you were advising those sovereign
03:32wealth funds, or maybe advising is a big word, if you were sitting with them and having a
03:35chat about where to allocate right now, where should these funds allocate strategically?
03:41Absolutely. I mean, a lot of them are already doing that across several different themes,
03:46AI being one of them, technology being another. If you look at the liquid markets from a fixed
03:50income perspective, it's becoming more and more favorable given where yields are today.
03:54So we shouldn't forget that liquidity continues to be one of the big angles that sovereigns
03:59look at depending on the objective of the sovereign. And another element becomes the thematic
04:05angle of achieving shorter-term returns for achieving longer-term objectives.
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