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The Middle East is again becoming the “ATM” of the planet

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Tens of billions of dollars of investment around the world from Gulf countries

Η Μeση Ανατολor γiνεται ξαν το «ΑΤΜ» του πλανorτη

The investment and financial forum “Future Investment Initiative” held in Riyadh next month, Mohammed bin Salman, will be a pole of attraction this year. Photo: Reuters

Eager to raise its global profile and improve relations with the West, which were strained in 2018 after the murder of anti-establishment journalist Jamal Khashoggi, Saudi Arabia is turning into the world's new financier. So are other Gulf monarchies awash in cash from the energy revenue “boom” at a time when traditional Western financiers, crippled by rising interest rates, are pulling back from deal-making and private investment.

The region's sovereign wealth funds are once again turning into “Eldorado” for private equity funds struggling to raise money. Recently announced deals include the acquisition of US private equity fund Fortress by an Abu Dhabi fund for more than $2 billion and the aircraft leasing arm of Standard Chartered by a Saudi Arabian fund for $700 million. Companies and funds overseen by Abu Dhabi's national security adviser, Sheikh Tahnoun bin Zayed al Nahyan, have moved to buy Standard Chartered and investment bank Lazard. They have also struck deals to buy a British healthcare company worth $1.2 billion and to take partial control of a Colombian food giant for nearly $6 billion.

“Now, everyone wants to go to the Middle East. It's like the gold rush in the US at one time,” says Peter Jadersten, founder of fundraising consultancy Jade Advisors. Fund managers visiting the region say they often wait across the street from rivals in sovereign wealth fund waiting rooms. Silicon Valley and New York executives are a near-constant presence in the white marble lobby of the Four Seasons Hotel in Abu Dhabi, as they are at other top hotels.

Saudi Arabia's Crown Prince Mohammed bin Salman's Future Investment Initiative investment and finance forum in Riyadh next month will be a magnet for investors this year. The “Davos of the desert,” as it's called, is expecting so much demand that it's charging executives $15,000 a person to take part.

In 2018, after Khashoggi's assassination turned the oil-producing kingdom into a toxic place to do business, Saudi officials watched a mass exodus of American financial executives. In the years that followed, many startups and funds avoided investing in the country.

Since last year, when other sources of funding began to decline, Saudi Arabia has become more in demand. At Saudi Arabia's sovereign wealth fund (PIF), commitments for “investable securities” – a category that includes private equity – rose to $56 billion in 2022, from $33 billion a year earlier. Abu Dhabi's Mubadala said equity commitments doubled to $18bn in 2022.

At the same time, the traditional backers of capital—retirement investment plans and college endowments—are in retreat. The global shift to higher interest rates caused losses in the largest parts of their portfolios, particularly stocks and bonds. Investors poured $33 billion into US-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 equity fell 10% last year to $1.5 trillion. dollars, according to Preqin, a decline that many expect to continue.

Raising capital has become much more difficult in the past 12 months, analysts say. And in this climate the reason for the boom in funding and deal-making in the Middle East is twofold. Higher energy prices – due to Russia's invasion of Ukraine – have given the region's oil and gas-dependent investment funds tens of billions of extra dollars to spend. At the same time, Saudi Prince Mohammed and top officials in the UAE are vying for more influence on the world stage – from geopolitics and economics to sports – pouring extra money into their coffers to seal deals and expand industry at home.< /p>

Source: www.kathimerini.com.cy

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