‘A new force shaping the future of the global economy’: Saudi Arabia PIF chief

Public Investment Fund of Saudi Arabia Managing Director Yasir Al-Rumayyan pictured at the Future Investment Initiative in Riyadh. (AFP)
Updated 10 April 2018
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‘A new force shaping the future of the global economy’: Saudi Arabia PIF chief

  • $200 billion investment in KSA could give Saudi Arabia impetus to lead development of renewable energy from solar power
  • Yasir Al-Rumayya has mapped out how PIF would get to the $2 trillion level by 2030
New York: As the clocks ticked to midnight in New York’s Plaza Hotel, Yasir Al-Rumayyan was nearing the end of a busy day in a hectic week. But there was one event he simply had to attend, mainly because it might just involve the complete transformation of the renewable energy industry.
In the luxurious hotel’s corridors, just outside the Monroe Suite, the managing director and chief executive of Saudi Arabia’s Public Investment Fund was waiting, along with a watchful security contingent and an expectant media pack, for the arrival of Crown Prince Mohammed bin Salman and an announcement that everyone had been assured was “big.”
Al-Rumayyan shook some hands and took some congratulations on the successful interview he had done that afternoon with Maria Bartiromo, the anchor for Fox Business Network TV channel. He looked tired, but accomplished.
In that interview, he had once again committed PIF to becoming a “global investment powerhouse” with a staggering $2 trillion in assets under management by 2030, and when the small crowd of journalists and cameramen were shown into the presentation suite, it was obvious that the next phase toward achieving that ambition would begin that very evening.
Al-Rumayyan stood locked in contemplation alongside Khalid Al-Falih, the Saudi minister of energy, as the Crown Prince and Masayoshi Son, the founder and chief executive of Japanese hi-tech finance house SoftBank, unveiled an agreement to put Saudi Arabia, and PIF, in charge of the biggest investment ever in solar energy.
The $200 billion investment in the sun-rich Kingdom could give Saudi Arabia the impetus to lead the development of renewable energy from solar power, boost the economy with growth and thousands of jobs, and save it $40 billion a year in energy bills.
It was exactly the kind of transformational deal he had described earlier that day. “We want to enable new sectors and new industries, and make them more practical. Some of the new ideas are really great ideas, but they are not practical,” he told Bartiromo.
Just a few years ago solar energy might have fallen into the “not practical” category, but — with PIF and SoftBank’s investment — it might just be reaching the tipping point of practicality. This was what he had meant when he said: “We want to present new opportunities to reshape the global economy.”
Al-Rumayyan has been chosen as the man at the sharp financial end of the ambitious Vision 2030 strategy to transform the economy of Saudi Arabia away from oil dependency. His education in Saudi Arabia was rounded off at Harvard Business School, and the top job at PIF came after various roles with Saudi financial institutions and market authorities.
He was made managing director and chief executive of PIF just a few months after the Crown Prince took charge of the once-sleepy pensions arm for the Saudi government, and began to change it radically.
“The Crown Prince is a great visionary and he looked at the things that he thought we should be looking at, and I agreed with him totally,” said Al-Rumayyan.
Virtually everything has changed at PIF since then. It has a new ambition: To be the biggest single investor in the world measured by assets under management. It has a new investment strategy: To invest in the future. And it has a new corporate culture: To hire the best and the brightest investment minds from around the world to implement the Vision 2030 strategy.
On the first target, he mapped out how PIF would get to the $2 trillion level by 2030. “A year ago, we had $150 billion assets under management. Last September that stood at $250 billion … By 2020 we should be $400 billion and by 2030 we should be $2 trillion. So how we achieve the target is, of course, challenging, but it’s very much doable,” he said.
PIF’s Vision Realization Program commits it to higher performance targets for the 80-odd companies, of which about 20 are quoted, that are in its biggest pool of assets, the Saudi domestic funds. These had been delivering a return of 3 percent, but this has already increased to between 4 and 5 percent, Al-Rumayyan said.
“We were previously a passive investor, but now we’re more active,” he added.
The second way to help get to the $2 trillion figure is via the use of funds from the government in the form of cash from the enormous sell-off of government companies set to begin soon. “The government will keep investing capital via the proceeds of the privatization program. That is another good way to increase our assets under management,” he said, pointing out that PIF was not obliged to pay anything back to the government in dividends.
That pot would include the proceeds from the forthcoming initial public offering of Saudi Aramco, billed as the biggest single IPO in history. “So that’s a minimum of maybe $100 billion coming to us, maybe more, not depending on the valuation only, I would say, but on the size of the IPO we’ll be offering,” he said.
The third technique to get to the $2 trillion goal is through the new, aggressive investment strategy PIF has adopted under Al-Rumayyan. He reeled off a list of the biggest investments made in the past couple of years: Uber, SoftBank Vision Fund (the $100 billion hi-tech investment fund set up and managed by the Japanese bank with a $45 billion PIF investment), Blackstone, and the latest — Magic Leap, the Californian developer of “mixed reality” technology, which he called “really, a great company.”
“All these have outstanding growth rates. They are very disruptive and will add a lot of value to our portfolio,” Al-Rumayyan said.
“So, add it all up, and the $2 trillion is a conservative estimate,” he judged.
Not much else about the new PIF can be called conservative. The partnership with the hi-tech Vision Fund is central to the strategy. “Traditionally our historical portfolio was in Saudi equities and fixed income with low or even negative returns. It was all in conventional investments.
“But we see new trends coming to the future want to invest in the future, like robotics and even autonomous cars. It’s coming, it’s here. I know we had an incident recently (the fatal accident with an autonomous Uber vehicle in Arizona, US) but it’s one incident out of 30 million hours of test driving. In the grand scheme it’s really a fraction of a fraction of a percentage,” he added enthusiastically.
Data sciences will also be a focus of the new PIF strategy. “With the Internet of things, everything will be talking to everything else and the amount of data will be unprecedented. People will know what you’re buying, what you’re doing, your preferences even without you knowing about it,” he said.
Medical investment will also be to the fore. “If we’re going to have prosperity people are going to need to have greater lifespans and ages. All these things will be the focus of our investments. In addition to the greater impact it will have on our life, it is going to be lucrative,” Al-Rumayyan said.
PIF has not given up entirely on conventional investment. Al-Rumayyan pointed to the recent stake in AccorHotels as an example of investment in a fast-growing conventional business, but a much bigger focus is on infrastructure, via its $20 billion share of Blackstone’s $40-$50 billion US fund for US infrastructure.
“It needs to be upgraded. So we created the largest fund in the history of infrastructure investment. It will close in the coming month or two, and then we can start work. Streets, bridges, pipelines, tunnels, even airports — all need to be upgraded in the US and internationally. With the political will we have from the administration I think it’s a really good opportunity for us to be here,” he said.
And, of course, there are the huge infrastructure investments under way back home in Saudi Arabia. PIF is running three of the big “giga projects” — the Neom development, the Red Sea Resort and the Al Qidiya leisure complex outside Riyadh.
“Giga projects are excellent investment ideas. The growth rates in the Saudi economy will be really great and bigger than the past five years,” he said.
Managing these projects presents a challenge for PIF, which just a couple of years ago had a staff of only 40. Now, Al-Rumayyan said, it employs 240, expected to rise to 480 by the end of the year, with new offices planned in the US, London and Tokyo. This is in addition to the large number of investment bank advisers and consultants PIF uses.
One of the challenges, he said, lies in finding the right people to partner with, which he compared to being an orchestral conductor. “Sometimes the biggest challenge is to get people to play together,” he said.
But he is convinced that the world can be persuaded of the opportunities presented by the new-look Saudi Arabia.
“It is one of the most stable states in the region with 100 years of track record. Look at some of the countries around us. Some other states attract FDI but are less stable than Saudi.
“You have the history, you have the infrastructure, you have the rules and regulations, you have the enforcement of the law, especially if you look at what we’ve been doing lately with the war on corruption. We’re trying to pave the way for anybody to come in and feel comfortable that they know what it is they’re getting themselves into,” he added.
He is also convinced that the bold new Saudi world has the support of most people in the Kingdom. “Of course there is change, but it is all about positive changes and most of the people in Saudi Arabia want that. Now we’re seeing it and now we all want to participate in it. The year 2018 will be a great year for us and I think we’ll see a lot of good things,” he said.


INTERVIEW: Dan Balmer on steering Aston Martin beyond Bond in the Middle East

Dan Balmer
Updated 17 November 2018
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INTERVIEW: Dan Balmer on steering Aston Martin beyond Bond in the Middle East

  • The Middle East will be a key market for the iconic UK car maker’s second century, says regional chief Dan Balmer
  • Aston has been around for more than 100 years, but has embarked on an ambitious “second-century strategy” under group CEO Andy Palmer

The name is Balmer. Dan Balmer.

The new president of Middle East business for Aston Martin Lagonda, the iconic British car maker beloved by James Bond, is grateful for the glamorous legacy of the fictional super-spy, but also conscious of the need to move on.

“We’ve been with Bond for 50 years, and he has been a real asset for us. But we have a team internally called ‘Beyond Bond.’ If we want to grow the brand audience, into the family and female markets, we have to look beyond the cars that Bond drives,” said Balmer.

That move away from some aspects of Aston’s heritage is reflected across the whole company. Aston has been around for more than 100 years, but has embarked on an ambitious “second-century strategy” under group CEO Andy Palmer.

The company that is emerging will be different, a luxury brand rather than a mere maker of fast boys’ toys; it will be increasingly global, with the Middle East playing a central role; and it will — hopefully — be sustainable, in both a financial and environmental sense.

British actor Roger Moore stands beside an Aston Martin car during a 'James Bond photocall' at Bletchley Park in Milton Keynes, on October 17, 2008. (AFP)

Palmer’s strategy is to steer the group away from the boom-and-bust cycle — it went bankrupt seven times in its first century. He pulled off an essential part of that strategy with an initial public offering (IPO) on the London Stock Exchange last month, which valued the company at $5.6 billion.

Aston will continue to make fast cars, but they will increasingly be more fuel efficient and even electric; and it will put its name to other luxury merchandise — plans for apartments and speed boats are well advanced. Next on the luxury list of Aston-branded items are submarines and vertical take-off aircraft.

Bond, with his love of both the high life and high-tech gadgetry, would probably approve of the strategy. “We’re not hawking the brand around — you won’t see us doing aftershaves and umbrellas. But customers want to buy our cars because they want to buy into beauty, and we’re stretching that now into other areas,” Balmer said.

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BIO: 

BORN 

1976 Southampton, UK.

EDUCATION

Design technician apprentice, Rover Group.


CAREER

•BMW design engineer.

•Rolls-Royce Motor Cars, general manager in Asia-Pacific. 

•Aston Martin Lagonda, president for the UK and
South Africa.

•Aston Martin Lagonda, president for the Middle East, North Africa and Turkey.

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He knows a thing or two about luxury marketing and car design, having previously worked for Rolls-Royce in Asia, based out of Singapore. But now the challenge is to extend the Aston business in the Middle East in a new division within the global set up — covering the Middle East, North Africa and Turkey (MENAT).

Reflecting Aston’s traditional regional business hub in the region, he will be based in the UAE, but the headquarters has been moved from Dubai to Abu Dhabi, where the MENAT HQ was officially inaugurated last week.

Balmer feels that Dubai’s reputation for flash glamor is “a thing of the past,” but also believes that the UAE capital is more in tune with the Aston image. “Aston has an understated elegance and that is also how we feel about Abu Dhabi. It is the capital, recognized as the center of the financial scene, the big decisions are made here, and with Yas Island (the venue for the big Formula 1 Grand Prix later this month) it is a great location for motor sports.”

The Aston Martin DB10, built exclusively for the James Bond film "Spectre," is displayed at the 2015 Los Angeles Auto Show in Los Angeles, California, November 19, 2015. (AFP)

Track racing is still a big thing for Aston, not least because many of its cars are too fast to be driven flat out on roads, but also because it helps the company maintain its high-speed image against competitors such as Ferrari and Lamborghini, the UAE’s sports cars of choice.

Under the second-century strategy, Aston can offer the DB11, the DBS (“a boot in a suit” says Balmer), the Vantage and the Valkyrie as its “overtly aggressive” cars to rival the Italians, and will also soon begin to produce a range of mid-engined cars to take on the likes of Porsche and Mercedes.

Saudi Arabia is big on collectors’ cars, like our Vulcan. But we need to grow the brand.

 

“We are breaking out of our conservative shell. These are track-based products, but meant to be driven on the road, true sports cars,” Balmer said.

But the really radical product is yet to come, and will figure prominently on Middle East roads when it arrives, some time in 2020. Aston has hitherto held off entering the SUV market, which is the fastest-growing sector in the world’s biggest markets, like the US and China.

The DBX is a luxury SUV, a bit bigger than most on the roads now, with five doors and elegant lines. It is aimed at the upmarket family market, and seems a natural fit for the Middle East, which has been SUV-crazy for decades. 

Balmer thinks it will become Aston’s biggest seller in the region. “We just have not had the offering in that segment before, but in the Middle East a majority of luxury car buyers would be SUV, with sports cars a weekend plaything,” he said.

In this file photo, an Aston Martin DB5 is displayed as part of an exhibition dedicated to James Bond at the main hall of La Vilette in Paris. (AFP)

He is relishing the prospect of unleashing the DBX on Saudi Arabia. Aston has been in the Kingdom a long time, with a long-standing partner the Hajji Husein Alireza group and showrooms in Jeddah and (more recently) Riyadh, to be followed by an outlet in Alkhobar.

But Saudi Arabia has not lived up to the potential of its big wealthy population. It ranks behind the UAE, Kuwait and Qatar, roughly alongside Turkey in Aston’s regional sales rankings.

“Saudi Arabia has more opportunity for us. Because of the sheer weight of wealthy individuals it means there are more people who will buy our cars there. Saudi Arabia is big on collectors’ cars, like our Vulcan, and the other beautiful cars we produce like Vanquish and DBS. But we need to grow the brand,” Balmer said.

 

 

“We need to do an education job in Saudi Arabia, both in terms of what Aston stands for in the market and the new products as well. I think Saudis will go for the idea of DBX, and that’s where the key focus will be for us.”

He believes the Saudi market is perhaps more conservative than the UAE in terms of colors and models, but there is potentially a far bigger market among Saudi nationals than Emiratis.

Saudis buy Rolls-Royce cars in big numbers, and having worked for the leader in motoring luxury Balmer appreciates the difference between marketing Rolls and Aston. “They differ in the customer type. Aston buyers tend to be really into their cars. They are ‘petrol heads’ but also discerning.

“Rolls customers know their cars too, and might have an Aston in the garage as well, but they’re buying a Rolls-Royce as more a statement purpose — for business use, or a reward in life. An Aston is more a purchase of emotion and desire,” he said. Whether as a reward or out of emotion, buying an Aston is a considerable outlay. The average price ticket is around $175,000, and such an impulse purchase could easily be put off if personal economic circumstances took a downturn.

In the Middle East, where economies are tied to the oil price, that makes Aston subject to the vagaries of the global crude market. “What’s happening in the region is that governments are diversifying away from oil. (Saudi Arabia’s reform program) Vision 2030, for example, is a big change and good news for us. It will eventually take the volatility away from the macro economic environment. But we will always be dependent to some degree on global economic forces. China now drives the rest of the world in many respects,” Balmer said.

The IPO was an opportunity for Aston’s long-term backers — financial institutions from Italy and Kuwait — to realize some profits on their investments. The share sale raised no new money for expensive research and development, which some analysts criticized.

“There was no massive cash injection because all our new projects were already invested. And we’re making profits. But the IPO secures the long-term future of the company,” Balmer said.

In difficult global markets, the shares have been trading below the issue price since day one, but recently two big investment institutions — Merrill Lynch and Goldman Sachs — put them on the “buy” list. If they achieve sufficient value to be included in the main FTSE 100 list, Aston will be the first car company for 30 years to be on the UK’s main trading board.

That would be something of a triumph for Palmer and the second-century strategy, but Aston has another finishing line in sight before that: The Abu Dhabi Grand Prix. “We’ve got a number of things planned around the race, not least winning it,” Balmer said.