Financial Times

Saudis pull billions from global asset managers to fund deficit

by Simeon Kerr ­

September 29, 2015 | 12:58 am
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Saudi Arabia has withdrawn tens of billions of dollars from global asset managers as the oil­rich kingdom seeks to cut its widening deficit and reduce exposure to volatile equities
markets amid the sustained fall in oil prices.

The foreign reserves of the Saudi Arabian Monetary Agency have dropped by nearly $73bn since oil prices started to decline last year as the kingdom keeps spending to sustain the
economy and fund its military campaign in Yemen.

Several asset managers were hit this month by redemptions, which came on top of an initial round of withdrawals this year, people aware of the matter said.

“It was our Black Monday,” said one fund manager, referring to the large number of assets withdrawn by Saudi Arabia last week.

The latest withdrawals will be a big blow for institutions that have benefited from years of rising assets under management from oil­rich Gulf states, but are feeling the pinch after oil
prices collapsed last year.

Nigel Sillitoe, chief executive of financial markets intelligence company Insight Discovery, said fund managers estimated that Sama had pulled out $50bn­$70bn over the past six
months.

“The big question is when will they come back, because managers have been really quite reliant on Sama for business in recent years,” he said.

Sama’s reserves held in foreign securities have fallen $71bn in the past year, accounting for almost all of the $72.8bn reduction in overall overseas assets.

Other industry executives estimate that Sama has withdrawn even more than $70bn from existing managers.

While some of this cash has been used to fund the deficit, these executives say the central bank is also seeking to reinvest in less risky, more liquid products. “They are not
comfortable with their exposure to global equities,” said another manager.

Fund managers with strong ties to Gulf sovereign wealth funds, such as BlackRock, Franklin Templeton and Legal & General, have received redemption notices, according to people
aware of the matter.

Some managers have seen several billions of dollars of withdrawals, or the equivalent of up to a quarter of their Saudi assets under management, they claimed.
Institutions such as State Street, Northern Trust and BNY Mellon have large amount of assets under management and are therefore also likely to have been hit hard by the Gulf
governments’ cash grab, the people added.

“We are not that surprised,” said another fund manager. “Sama has been on high risk for a while and we were prepared for this.”

BlackRock, which bankers describe as the manager handling the largest amount of Gulf funds, has reported second­quarter net outflows from Europe, the Middle East and Africa of
$24.1bn against an inflow of $17.7bn the previous quarter. BlackRock and other funds declined to comment or did not respond to requests. Sama did not respond to a request for
comment.

Additional reporting by David Oakley in London

Simeon Kerr ­


by Simeon Kerr ­

September 29, 2015 | 12:58 am
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