Why Saudi Arabia Doesn't Invest in Trophy Assets

OIL-RICH Gulf countries do not shy away from trophy assets. Qatar owns Harrods, 95% of London’s tallest building, the Shard, and Paris Saint-Germain, France’s top football club. Abu Dhabi is said to be trying to buy the Time Warner building in New York. But Saudi Arabia, the biggest oil power of the lot, has few foreign adornments to its name.

Gulf countries disclose scant details about their sovereign-wealth funds (SWFs), but Saudi Arabia is the most cautious investor, says Michael Maduell of the Sovereign Wealth Fund Institute, an American outfit which tracks them. Most of the $750 billion hoard it has piled up over the past decade of high oil prices is sitting at the Saudi Arabia Monetary Agency, the country’s central bank. It invests its reserves mainly in bonds and equities, rather than less liquid but more lucrative assets such as property. In 2008 the government set up a more adventurous investment arm, Sanabil. But it holds assets of perhaps $5 billion, compared with the Abu Dhabi Investment Authority’s $773 billion or Kuwait Investment Authority’s $410 billion.

“This strategy is explained by Saudi Arabia’s history and demographics,” says John Sfakianakis of MASIC, an investment firm in Riyadh. With 20m citizens, it has far less wealth per person than Qatar with its 250,000 citizens. Saudi officials are haunted by memories of the 1980s and 2009, when the price of oil plunged and the kingdom had to borrow heavily and sell foreign assets to finance its spending. Then came the Arab spring in 2011, to which its rulers responded with more handouts.

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