Kingdom Holding bucks European investment exit trend

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• UK company M&G Plc has $370bn in assets under management
• 40% of Middle East investors reduce spend in Europe
• Russia-Ukraine war leads sovereign investors to look further afield

Saudi Arabia’s Kingdom Holding Company is investing $269 million in British insurance and asset management firm M&G Plc, despite the trend towards Middle East sovereign wealth funds backing away from Europe.

M&G has over $370 billion in assets under management.

Kingdom is part-owned by Saudi Arabia’s Public Investment Fund (PIF), manages a global portfolio of assets worth more than $13 billion, and has stakes in household names such as Citigroup, Accor, Uber and Twitter.

It said the investment was part of its strategy to diversify its “exposure in new and promising sectors”.

• Prince Alwaleed sells $1,5bn stake in Kingdom Holding to PIF
• PIF’s Aston Martin deal will put Saudi’s auto industry in fast lane

The announcement comes despite the latest Invesco Global Sovereign Asset Management Study, which surveyed chief investment officers at 63 sovereign wealth funds and central banks in the Middle East, found that 40 percent of respondents said they plan to reduce allocations to developed countries in Europe this year. 

Of the remaining 60 percent, half said their allocations would remain the same, while 10 percent said it would increase.

This compares to 2021 when just 12 percent said they would decrease exposure, with 88 percent saying it would stay the same.

In terms of cash flow, 70 percent of Middle East respondents said they would increase their investment in North America, compared to 12 percent who said the same in 2021 and 38 percent planning to reduce their American portfolio.

Russia-Ukraine war rattled Middle East investors

Rod Ringrow, London-based head of official institutions at Invesco, told AGBI he believed Russia’s invasion of Ukraine in February had rattled some Middle East sovereign investors and they were therefore looking to move their investments further afield.

“The US has always been a major destination for the Middle East sovereignty for investment,” he said.

“I would read it as they’re comfortable putting more emphasis back in the US, and also away from the conflict zone, but also looking at the economies that are more likely to be impacted by energy issues and supply chain issues over the next twelve months.”

The Invesco report also quoted an unnamed Middle Eastern development sovereign as saying that European investments had been seen as “cheap prior to the invasion”, but it was now focusing “more on political risk” when making its valuations.

Diego Lopez, managing director at Global SWF, a New York-based advisory specialising in sovereign wealth funds, disagreed with the Invesco survey finding and said recent currency fluctuations have had an impact.

The British pound has fallen from £1.37 against the US dollar in January to £1.18 this month.

“I don’t necessarily agree with that observation – the fall of the euro (and of the sterling) is presenting good opportunities in Europe, including the UK at the moment and we have started seeing a renewed interest by SWFs there,” Lopez said.

“This is especially true among Middle Eastern funds, which traditionally have stronger ties with Europe.”

However, Invesco’s Ringrow remained unconvinced: “They’re big supertankers of investment, they don’t switch quickly. They’re long-term investors,” he said, adding they wouldn’t be swayed by “short-term currency movement”.