Evolution of asset management business in KSA

In my opinion, the asset management business in Saudi Arabia has undergone four phases: pre-Capital Market Authority, post-CMA establishment, during the latest leadership of the CMA, and after the recent new initiatives by the Public Investment Fund.

I started my investment banking career in the late 80s with the Saudi National Bank, which used to be called the National Commercial Bank. After my training rounds in different divisions, I was placed in the newly created Investment Management Division. My first assignment was setting up the Shariah-compliant International Trade Fund, a fixed-income instrument applying the Murabaha guidelines.

Back then, investment funds were a novelty in the Saudi market, and we had to go through extensive training exercises with the bank’s branch managers. The head of the IMD then, Fred Crawford, headhunted from Citi, was working around the clock to launch as many funds as possible. He approached and hired Frank Russel International, a leading global advisor, to help SNB select and manage the managers. I remember within a few weeks of launching the ITF, we raised around $200 million. Our core team of professionals back then included four Saudis, two Americans, and one British. Our regulator was the Saudi Central Bank.

Years later, upon my return from a 15-year London tenure with SNB and the International Investor, a Kuwaiti-based boutique investment bank, I set up BMG Financial Group, which was granted the first license in the country.

The CMA was a few years old, marking the second phase of the evolution of asset management. BMG was the first national firm to produce world-class research with recommendations for listed stock trading. Also, we were working closely with the CMA team on exploring and structuring new funds, such as exchange-traded funds. Due to the decision by the government to take over 30 insurance companies public via initial public offerings, we decided to focus primarily on advising businesses to cope with the unprecedented demands of arranging insurance companies’ IPOs. To date, we are the only investment bank that managed to handle three IPOs simultaneously.

The future of asset management in Saudi Arabia beckons, and I stand as a testament to the transformative journey that has brought us to this pivotal juncture.

As for the third phase, which I believe started under the CMA’s new dynamic and forward-thinking management, quantum-leap evolution has occurred in the asset management business in terms of total assets under management, number of funds, global indices that included Saudi equities, and the noticeable increase of licensed asset managers.

The fourth phase is linked to PIF’s new initiatives. Last week, during the Future Investment Initiative, there was a PIF asset management forum. Mohammed El-Kuwaiz, CMA chairman, and Yazeed Al-Humied, PIF deputy governor and head of investments in the Middle East and North Africa region, introduced two new initiatives: the managers’ gate platform and the portfolio management development program.

The managers’ gate platform aims to promote growth in the asset management ecosystem by exploring potential opportunities and facilitating PIF’s seamless collaboration with fund managers. The portfolio management development program, sponsored by SNB, aims to provide financial market training of the highest quality to aspiring portfolio managers in the country.

According to authoritative sources at CMA and PIF, the evolution witnessed over the past decades, while impressive, merely scratches the surface of the asset management potential inherent within the Saudi market. This untapped potential is poised for substantial growth in the years to come.

It is our unequivocal mission at BMG to seize this moment and reactivate our license, emerging as a dynamic and influential player during this fourth phase of evolution and beyond. The future of asset management in Saudi Arabia beckons, and I stand as a testament to the transformative journey that has brought us to this pivotal juncture.

Basil M.K. Al-Ghalayini is the chairman and CEO of BMG Financial Group.