LONDON: Middle Eastern sovereign wealth funds (SWFs) are buying more alternative assets, such as private equity, real estate, gold and infrastructure, to lift returns in an era of lower oil prices.
The move by SWFs to tilt their investment portfolios more toward alternative assets is a worldwide trend, a direct result of the crash in the oil price four years ago, according to a report by the global consultancy PricewaterhouseCoopers (PwC).
SWFs now allocate almost a quarter of their assets under management to alternative investments, with “lower oil prices for longer” driving the funds to broaden their investment strategies. Investment in fixed income instruments, such as government bonds, had dropped from a peak of 40 percent in 2013 to 30 percent in 2016, PwC said.
The report, titled “The rising attractiveness of alternative asset classes for sovereign wealth funds,” said that although the funds faced adverse conditions in recent years when asset growth began to stall as a result of falling oil prices, total assets under management still grew to $7.4 trillion in 2016, albeit at a slower pace than in earlier years.
PwC said it expected the growth rate of assets under management to increase in the coming years as SWFs invested in non-fossil sources and diversified their portfolios to include alternative investments.
Laurent Depolla, PwC Middle East sovereign investment funds leader, said: “Middle East SWFs, in general, have been following the global trend by allocating more capital toward alternatives. Over the five-year period their average allocation to the alternatives asset class has increased from 3.7 percent to 6.1 percent of total assets, while their average target allocation rose from 6.5 percent to 8.6 percent.
“This can be attributed to new sovereign wealth funds entering the asset class as well as continued appetite from those already active.”
Infrastructure was also a large focus of SWFs in the region. The data firm Preqin
said that European infrastructure deals were particularly attractive for Middle Eastern SWFs, with some “possibly looking to deploy capital at even lower preferred rates of return.”
Commenting on the key influences facing investors in the Middle East, Tarek Shoukri, PwC sovereign investment fund director, said: “Middle East SWFs seeking to generate superior returns under challenging economic conditions have started to adjust their investment strategies. Due to the drop in the oil price in recent years, there have been less inflows from their traditional revenue sources.”
However, the funds’ attempts to maintain return objectives by investing in certain alternative asset classes was not without risks as most alternatives were highly illiquid, the PwC report warned. One exception was gold, an asset with “one of the highest rates of daily volumes exchanged and one that can provide protection against short and medium-term market corrections.”
Will Jackson-Moore, PwC’s global head of sovereign investment funds and private equity, said: “SWFs play an important role helping governments stabilize the economy and exchange rates. We expect alternatives to be prominent in SWF portfolios in the future as they can offer increased diversification, principal protection, a hedge against inflation, and an increase in portfolio performance.”
But Jackson-Moore cautioned that finding the right allocation strategy for these asset classes was crucial. Monitoring of portfolios and investments was essential, he said, and capital would sometimes have to be reallocated to reflect economic developments.
“Overall, though, the benefits seem to outweigh the costs, as the varied nature of alternatives provides SWFs with the ability to select an asset class specific to their investment needs,” he said.
Oil crunch forces Middle East funds to hunt for alternative assets
Oil crunch forces Middle East funds to hunt for alternative assets
Asir region to move from planning phase to delivery in 2025, official says
RIYADH: Saudi Arabia’s Asir region is set to shift from the planning phase to execution in 2025, with several major projects, including the Seven Entertainment Complex, scheduled for completion, according to a senior official.
Speaking to Arab News on the sidelines of the second day of the third Saudi Tourism Forum held in Riyadh from Jan. 7 to 9, Acting CEO of Asir Development Authority Hashem Al-Dabbagh explained that the entity is working with several parties to ensure that the projects in the pipeline progress this year.
This falls in line with the authority’s aim to attract approximately 8 million tourists by 2030.
It also aligns well with the entity’s goal to transform the region into a global destination that will become a world-class tourist hub, both within the Kingdom and internationally, by striking a balance between development and conservation.
Al-Dabbagh said: “2025 is a very exciting year for a number of reasons. Maybe the first one is that the first large project, Seven Entertainment Complex by the airport, will be completed in 2025. So, we launched a number of projects, but this is the first one that should be completed this year. So, we’re very excited about that.”
He added: “Many of our projects underway, which have to do with the planning of the Asir region, should be completed in 2025. So it’s nice to see us transition from planning and ideation to actual investment and execution in this year.”
The acting CEO highlighted that over the past three years, the authority has been working diligently with all counterparts in Saudi Arabia. He underlined that many agreements with key stakeholders, including government entities such as the Ministry of Tourism, the Ministry of Investment, and the Ministry of Culture, have already been signed.
“We’ve already signed with them, and we have ongoing relationships with all these entities, that allow us to see through our mandate,” Al-Dabbagh said.
“It’s also worthwhile to mention that the Asir Development Authority has a mandate to oversee, to coordinate, and to plan and to make sure everything goes well but the actual development on the ground takes place through other entities that either have a development mandate if they’re a public sector or by private sector entities,” he added.
During the interview, the acting CEO also shed light on how the investment sector within the Asir Development Authority works to distill capital regionally.
“So, they have a pipeline and every investment that we are following is in one of five phases, starting from the ideation phase to the operating phase,” Al-Dabbagh said.
He added: “We have been exceeding our targets over the past couple of years. As a matter of fact, if we sum the number of investments that just the investment sector has in the pipeline, it comes out to about SR28 billion ($7.45 billion), not including PIF (Public Investment Fund) investments. PIF investments are larger than that amount. So, when you add them together, you get a very large number.”
The acting CEO explained that this figure sums up the investments across all phases.
“Now naturally some of these investments are going to materialize and some of them are going to materialize in a way that is different from what we understand today, and some of them will not. So, that 28 (billion) number is sort of a goal if everything materializes as per the plan,” Al-Dabbagh said.
“Asir is the place to be if you are looking to invest in the tourism sector or adjacent sectors in Saudi Arabia,” he added.
The acting CEO explained that Asir is the only region among Saudi Arabia’s 13 areas with an approved strategy from the central government. The vision of this approach is to establish Asir as a premier year-round destination, leveraging its unique cultural and natural assets.
“This is very intimately related to the tourism strategy of Saudi Arabia,” he said.
Al-Dabbagh also discussed the Kingdom’s hosting of the FIFA World Cup in 2034.
“There are five regions within Saudi Arabia that are going to be hosting this World Cup , and they include Abha. So, Saudi Arabia and its five regions, including Abha, is going to be a host to probably the largest number of visitors coming from an event outside of the religious pilgrimage to Saudi Arabia,” he concluded.
Organized in partnership with the Saudi Tourism Authority and the Tourism Development Fund, the third edition of the forum features over 100 exhibitors.
It is a comprehensive platform for exploring the latest developments in the Kingdom’s tourism sector.
The event also offers visitors insights into major investment projects, prospects to elevate their skills, and avenues for forging collaboration that drives national tourism growth.
Saudi Arabia’s MSMEs see 22.6% growth in credit facilities to $88bn: SAMA
RIYADH: Credit facilities extended to micro, small, and medium enterprises in Saudi Arabia grew by 22.6 percent year on year in the third quarter of 2024, totaling SR329.23 billion ($87.8 billion), according to official data.
The Kingdom’s central bank, known as SAMA, revealed that 94.7 percent of these loans were provided by Saudi banks, while finance companies contributed 5.3 percent.
MSME lending represented 9.1 percent of banks’ total loan portfolios and 18.8 percent of finance companies’ credit portfolios.
The Saudi government has been actively encouraging financial institutions to allocate at least 20 percent of their loan portfolios to this critical sector, reflecting its strong and continued commitment to fostering business growth and economic diversification in line with Vision 2030.
In the third quarter, medium-sized enterprises received the largest share of credit facilities, totalling 55 percent, or SR181.05 billion.
Micro enterprises — those generating up to SR3 million in revenue with a workforce of no more than five employees — saw substantial growth, with credit increasing by 50.4 percent to SR36.14 billion, despite holding a smaller overall share.
Credit to small enterprises, which made up 34 percent of MSME financing, rose by 30.4 percent to SR112.03 billion during the same period.
The growth of SMEs in Saudi Arabia is driven by government-backed initiatives and Saudi Vision 2030’s ambitious reforms.
Key programs include Kafalah for loan guarantees, Tamweel for connecting SMEs with financiers, and the Saudi Venture Capital Co. for startup investments.
The Indirect Lending Initiative also enhances SME financing through intermediaries.
Regulatory advancements, such as the 2015 Companies Law, NIDLP, and the National Center for Privatization, have improved the business environment.
Vision 2030 aims to boost SMEs’ GDP contribution to 35 percent by enhancing productivity, developing skills, improving infrastructure, and supporting sector diversification.
Monsha’at key figures
The Small and Medium Enterprises General Authority, also known as Monsha’at, drives SME growth by improving access to financing through collaborations with financial institutions and initiatives including the Kafalah Program, which is designed to boost lending.
Monsha’at also champions entrepreneurship, supports business development with specialized training programs, and advocates for regulatory enhancements to create a more business-friendly environment.
According to its third-quarter report, Saudi Arabia saw a significant surge in commercial registrations, which grew by 62 percent year on year to 135,909, with 46.8 percent attributed to female-owned businesses.
This momentum points to MSMEs’ growing role as engines of innovation, job creation, and economic diversification, strengthening the foundation for sustainable, long-term growth.
It highlights increasing entrepreneurial activity and business confidence, with more diverse participation across industries.
The rise in female-owned businesses, in particular, reflects the success of government initiatives aimed at empowering women and fostering inclusivity in the economy, a core objective of Vision 2030.
Regionally, Riyadh led with 39 percent of new commercial registrations, totaling 53,150, followed by Makkah with 18 percent, or 24,782, and the Eastern Province with 15 percent, amounting to 19,841.
New expansion increases Riyadh airport’s capacity to 7m passengers
RIYADH: The first phase of the Terminal 1 expansion at King Khalid International Airport in Riyadh was inaugurated on Jan. 8, enhancing the airport’s capacity to accommodate up to 7 million passengers per year.
The ceremony was attended by Saudi Arabia’s Minister of Transport and Logistics Services Saleh Al-Jasser, who also serves as chairman of the General Authority of Civil Aviation.
Saudi Arabia’s aviation sector has experienced significant growth, marked by record passenger numbers, an expanding fleet, and new international partnerships—all aligning with the country’s Vision 2030 objectives.
King Khalid International Airport, in particular, has remained the top airport in the Kingdom for several months in 2024, achieving the highest compliance and operational standards. The expansion of Terminal 1 follows the completion of Terminals 3 and 4 in November 2022.
In his remarks, Al-Jasser emphasized that the phased expansion will increase Terminal 1’s annual passenger capacity from 3 million to 7 million. This development is part of a broader initiative to enhance both Terminals 1 and 2, contributing to Saudi Arabia’s Vision 2030 goals to strengthen the nation’s transportation infrastructure, improve the passenger experience, and stimulate economic growth through enhanced air connectivity.
“This expansion not only boosts the terminal’s operational capacity but also reinforces Riyadh’s role as a global hub for international travel and trade,” Al-Jasser said.
He further noted that the project would bolster tourism and economic activity while optimizing the overall passenger experience.
The newly expanded Terminal 1 features a host of modern amenities, including 38 check-in counters, 10 self-service kiosks, 26 passport control counters, and 10 automated gates. In addition, the terminal offers 24 boarding gates and 40 passport control counters in the arrivals area, complemented by 11 self-service gates designed to streamline passenger flow.
When combined with the upcoming enhancements to Terminal 2, the total capacity of both terminals is expected to reach 14 million passengers annually.
The expansion also includes upgrades to commercial spaces, air circulation systems, energy efficiency measures, and enhanced safety protocols.
Al-Jasser also highlighted the transformative potential of the recently unveiled master plan for King Salman International Airport.
The plan aims to position Riyadh as a premier global destination for events, while further establishing the city as a key player in international travel and commerce.
Ayman Abu Abah, CEO of Riyadh Airports Co., opened the ceremony by underscoring the importance of Terminal 1’s expansion. He reiterated that the project aligns with global operational standards and strengthens Saudi Arabia’s position as a vital air transport link between continents.
The inauguration event was attended by several prominent figures, including the President of GACA and the CEO of Airports Holding Company.
This expansion marks a significant milestone in Saudi Arabia’s ambitious efforts to build world-class transportation infrastructure, in line with the National Transport and Logistics Strategy outlined in Vision 2030.
Banking sector in Kuwait, Qatar and UAE to stay stable in 2025: S&P Global
RIYADH: Banks in Kuwait, Qatar, and the UAE are expected to maintain stability in 2025, supported by strong capital buffers, favorable economic conditions, and supportive government policies, according to a new analysis.
In Kuwait, S&P Global forecasts improved asset quality, driven by a stronger economy and lower interest rates.
The banking sector is well-positioned to deal with potential geopolitical stress in the region, with stronger lending growth offsetting the negative impact of lower interest rates on profitability, it added.
S&P Global’s analysis echoes the views shared by Fitch Ratings in November 2024, which stated that the standalone credit profiles of Islamic banks in Kuwait are expected to remain stable in 2025, supported by favorable operating conditions.
“After an estimated 2.3 percent contraction in 2024, we expect Kuwait’s GDP growth will rebound to 3 percent in 2025 as OPEC+ oil production restrictions are gradually eased, and project implementation and reform momentum improves,” said Puneet Tuli, S&P Global Ratings credit analyst.
The report added that accelerated reforms following last year’s political changes could improve the pace of reform and growth prospects for the economy, “which in turn would support higher lending growth for the banking system.”
According to the report, the credit losses in the Kuwaiti banking sector are approaching cyclical lows.
S&P Global added that banks are likely to resort to write-offs to limit the rise in the nonperforming loan ratio, supported by strong provisioning buffers.
The analysis further noted that banks in Kuwait operate with robust capital buffers and typically retain 50 percent or more of their profits, which supports their capitalization.
The US-based agency also highlighted that Kuwaiti banks’ funding structures benefit from a solid core customer deposit base and a net external asset position.
“Deposits from government and public institutions have experienced some volatility in the past, as these entities seek to diversify their deposits among local and foreign banks. However, we believe that government support to systemically important banks will be forthcoming if needed,” said S&P Global.
It added: “Private sector deposits from corporations and households have been stable and dominate Kuwaiti banks’ funding base.”
Qatar’s outlook
In Qatar, S&P Global expects continued strong performance for banks in 2025, driven by strong capitalization and ample liquidity. The rise in liquefied natural gas production, along with its impact on the non-hydrocarbon economy, is expected to support credit growth in the next two to three years.
The report added that local funding sources will play an increasing role in supporting credit growth among Qatari banks, driven by slower public sector deleveraging.
S&P Global also noted that the Qatari government’s strong support for its banking sector is expected to mitigate the risk of external debt outflows in the event of escalating geopolitical risks.
“Geopolitical tensions in the Middle East are high but we currently do not expect a full-scale regional conflict, and we anticipate macroeconomic conditions in Qatar will remain broadly stable,” said S&P Global Ratings credit analyst Juili Pargaonkar.
Forecast for the UAE
In the UAE, S&P Global forecasts improved asset quality metrics and lower credit losses in 2025, driven by a robust domestic economy.
The agency expects banks in the emirates to maintain strong capital buffers, robust funding profiles, and continued government support in 2025, which will underpin their resilience.
The analysis also noted that banks in the UAE have experienced a significant increase in deposits over the past three years, which will help sustain their strong growth momentum in 2025.
“Deposit growth has improved in recent years as private corporations and retail depositors prioritized saving over spending, and higher interest rates provided better yields on deposits,” said S&P Global.
It added: “We expect strong deposit growth to continue through 2025, given the non-oil economy remains supportive, leading to stronger cash flow generation from corporations.”
Saudi domestic tourism driving travel sector growth, Almosafer CEO says
RIYADH: Saudi Arabia’s domestic tourism is fueling a significant expansion in the Kingdom’s travel sector, with domestic bookings now making up over 40 percent of Almosafer’s overall travel market, according to CEO Muzzammil Ahussain.
This growth is underscored by a 45 percent year-on-year increase in domestic flight bookings in 2024, alongside a 39 percent rise in room night bookings, according to Almosafer’s latest travel trend report, released during the third Saudi Tourism Forum held in Riyadh.
The surge is linked to the country’s expanding tourism offerings and enhanced connectivity through low-cost carriers, with family and group travel seeing a particular boost, rising over 70 percent, the report added.
“The country has invested heavily in creating offerings and events to support domestic tourism,” Ahussain told Arab News on the sidelines of the event. “We see continued strength and sustainability in this, so we remain focused on domestic tourism.”
Almosafer, a Saudi travel company and part of Seera Group, is benefiting from this trend as domestic tourism becomes more sustainable. “In the report, over 40 percent of all of our bookings are now domestic,” Ahussain explained. “That doesn’t mean international travel is slowing down; overall travel is growing.”
He said flight prices dropped 7 percent year on year, prompting higher spending in destinations. “People are spending more on hotels, staying longer, and spending on experiences and events,” Ahussain said. “So overall, total spend is increasing.”
Despite the growth, challenges remain. Almosafer CEO said that the limited hotel supply during peak times, such as Riyadh season, leads to higher rates and makes it difficult for travelers to find accommodations.
“We’ve already seen a number of initiatives to improve hotel capacity and rooms across the country,” Ahussain said, adding that such improvements would make domestic tourism more attractive at all levels, from luxury to economy.
The company’s ongoing efforts to enhance partnerships with regional authorities and airlines are also key to this growth, and Almosafer said it collaborates closely with the Saudi Tourism Authority and regional bodies like the Aseer Investment Authority.
“We’ve had a number of signings at the Saudi Tourism Forum with different authorities from around the country to promote and market key destinations,” he added.
Ahussain also highlighted the strong partnerships Almosafer has with low-cost carriers like flynas and flyadeal, as well as its new partnership with Riyadh Air, which is set to launch later in 2025.
Looking ahead, Ahussain is optimistic about the impact of global events, such as Expo 2030 and the 2034 FIFA World Cup, on the Kingdom’s tourism sector. “These projects and events, as we saw with Expo 2020 Dubai, help build a brand for a city or country, and that brand creates awareness,” Ahussain said.
He continued: “When people come, whether domestically or internationally, we are working to build a foundation that supports them throughout their travel — before, during, and after these events.”
Almosafer is also preparing for an initial public offering as part of its long-term strategy, with a target IPO date in 2025 or 2026.
“In November 2023, Seera Group announced that Almosafer would be targeted for an IPO in two to three years,” he said.
“We’re still on track with that plan and working toward it.”
With domestic tourism growing rapidly, Almosafer is enhancing its digital offerings through partnerships aimed at streamlining travel services.
During the forum, Almosafer signed a memorandum of understanding with the Saudi Tourism Authority to integrate digital platforms, enhancing access to travel services.
Ahussain explained that the partnership also aimed to improve Sara Al, the smart guide for Saudi tourism, by adding booking services for flights and accommodations.
