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The Saudi and Kuwaiti oil ministers said yesterday
that OPEC will discuss the possibility of raising oil output if needed to
cool soaring prices. AFP PHOTO/HASSAN AMMAR (Photo credit should read HASSAN
AMMAR/AFP/Getty Images)
©AFP
Saudi Arabia has withdrawn tens of billions of dollars from global asset
managers as the oil-rich kingdom seeks to cut its widening deficit and
reduce exposure to volatile equities markets amid the sustained slump in oil
prices.
The Saudi Arabian Monetary Agency’s foreign reserves have slumped 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.
FirstFT is our new essential daily email briefing of the best stories from
across the web
The central bank is also turning to domestic banks to finance a bond
programme to offset the rapid decline in reserves.
This month, several managers were hit by a new wave of 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number of assets withdrawn by Saudi Arabia last week.
Institutions benefited from years of rising assets under management from oil
-rich Gulf states, but are now feeling the pinch after oil prices collapsed
last year.
Nigel Sillitoe, chief executive of financial services market intelligence
company Insight Discovery, said fund managers estimate that Sama has 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.
Since the third quarter of 2014, Sama’s reserves held in foreign securities
have declined by $71bn, 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Other industry executives estimate that Sama has withdrawn even more than $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 into 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 fund managers have seen several billions of dollars of withdrawals, or
the equivalent of a fifth to a quarter of their Saudi assets under
management, the people aware of the matter said.
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.”
Sama has over the years built up a broad range of institutions handling its
funds, including other names such as Aberdeen Asset Management, Fidelity,
Invesco and Goldman Sachs.
BlackRock, which bankers describe as the manager handling the largest amount
of Gulf funds, has already reported net outflows from Europe, the Middle
East and Africa.
Its second-quarter financial results reported a net outflow of $24.1bn from
Emea, as opposed to an inflow of $17.7bn in the first quarter.
Market participants say the outflow is in part explained by redemptions from
Saudi Arabia and other Gulf sovereign funds, such as Abu Dhabi.
BlackRock and other funds declined to comment or did not respond to requests
for comment. Sama did not respond to request for comment.
that OPEC will discuss the possibility of raising oil output if needed to
cool soaring prices. AFP PHOTO/HASSAN AMMAR (Photo credit should read HASSAN
AMMAR/AFP/Getty Images)
©AFP
Saudi Arabia has withdrawn tens of billions of dollars from global asset
managers as the oil-rich kingdom seeks to cut its widening deficit and
reduce exposure to volatile equities markets amid the sustained slump in oil
prices.
The Saudi Arabian Monetary Agency’s foreign reserves have slumped 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.
FirstFT is our new essential daily email briefing of the best stories from
across the web
The central bank is also turning to domestic banks to finance a bond
programme to offset the rapid decline in reserves.
This month, several managers were hit by a new wave of 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.
Institutions benefited from years of rising assets under management from oil
-rich Gulf states, but are now feeling the pinch after oil prices collapsed
last year.
Nigel Sillitoe, chief executive of financial services market intelligence
company Insight Discovery, said fund managers estimate that Sama has 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.
Since the third quarter of 2014, Sama’s reserves held in foreign securities
have declined by $71bn, 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 into 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 fund managers have seen several billions of dollars of withdrawals, or
the equivalent of a fifth to a quarter of their Saudi assets under
management, the people aware of the matter said.
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.”
Sama has over the years built up a broad range of institutions handling its
funds, including other names such as Aberdeen Asset Management, Fidelity,
Invesco and Goldman Sachs.
BlackRock, which bankers describe as the manager handling the largest amount
of Gulf funds, has already reported net outflows from Europe, the Middle
East and Africa.
Its second-quarter financial results reported a net outflow of $24.1bn from
Emea, as opposed to an inflow of $17.7bn in the first quarter.
Market participants say the outflow is in part explained by redemptions from
Saudi Arabia and other Gulf sovereign funds, such as Abu Dhabi.
BlackRock and other funds declined to comment or did not respond to requests
for comment. Sama did not respond to request for comment.