A ‘master of the universe’ faces his toughest test

A ‘master of the universe’ faces his toughest test
Martin Gilbert presents the Aberdeen Asset Management Scottish Open to Rickie Fowler in 2015. He shares a passion for golf with friend Donald Trump. (Getty Images)
Updated 02 March 2018

A ‘master of the universe’ faces his toughest test

A ‘master of the universe’ faces his toughest test

As a blizzard swirled and the temperature plummeted in Davos last month, a Scottish piper played a chilling lament outside the traditional Aberdeen Cafe, one of the focal points of the Swiss town’s glitzy power gathering.
Inside, Martin Gilbert was extending the hand of hospitality to some of the glitterati who attend the World Economic Forum annual meeting. The 62-year-old Scottish financier welcomed new guests and back-slapped old ones with customary bonhomie, distributing refreshments to keep the Alpine cold at bay.
“Like it or loathe it, Davos is the only place where that many influential policymakers, political leaders and business people are in one place at one time,” said Gilbert.
The financier had done the same thing many times before in a 35-year business career that had seen him create one of the leading investment firms in the world, making himself wealthy enough to qualify as one of the Davos “masters of the universe.”
He counts US President Donald Trump, who also attended the event, as a friend due to their mutual interest in golf in Scotland.
But this time at Davos there were some important differences. For one, the sign outside the cafe now read Standard Life Aberdeen (SLA), in recognition of the merger last year between Aberdeen Asset Management and Standard Life that pooled assets under management of $870 billion.
Inside, though he showed no signs of it, Gilbert was embroiled in one of the biggest challenges he had faced in a life that had taken him from Malaysia, where he was born to expat parents, back to the family home in Aberdeen and then on to the financial hubs of London and Singapore, and most recently to Abu Dhabi in the UAE.
He was staring at the loss of $153 billion of assets under management, a threat that could signal a tipping point for the newly merged business.
Backtrack just under a year, when Gilbert had announced a tie-up with Standard Life and a move to co-chief executive status alongside Standard’s Keith Skeoch. There had been rumors that Gilbert might sell Aberdeen for some time, but it was always likely he would be the consolidator, as much as the target of consolidation.
The merger, alongside his continued involvement at the top, meant that industry logic could be presented as the reason for the deal. In a recent interview with Arab News, he said: “The cornerstone of the deal was the extent to which Aberdeen and Standard Life complemented each other, and by putting them together the combined business will continue to grow. They complemented each other in two key respects: a minimal overlap in investment capabilities, and significantly different distribution strengths, resulting in a business which is highly diversified by asset class, clients and revenues.
“The increased breadth of investment capability will provide clients with more choice. Various pension funds, insurers and financial institutions are increasingly looking to interact with a smaller number of fund managers from whom they buy a wider range of strategies. Many of the US fund management giants have been very successful at marketing multiple investment strategies to clients.”
Nonetheless, there was also the argument that something had to be done to halt the decline in Aberdeen’s business, with billions of dollars withdrawn from Aberdeen’s management.
“Of course, the asset management industry is also facing various challenges, including the rise of passive investing, downward pressure on fees and increased regulatory pressures. But as a combined business we are much stronger to face these challenges head on and to capitalize on opportunities created,” said Gilbert.
Those outflows continued even after the merger — with more than $30 billion withdrawn in 2017 — but Gilbert was sanguine about overall trends and optimistic about the future.
“The outflows the combined business experienced last year were in line with our expectations given the asset classes affected, and the structural outflows from our lower margin mature books. Importantly, though, the momentum in the business was good, with around $83 billion of gross inflows during the first nine months of the year.
“We continued to innovate, launching new funds with strong backing from clients and winning new mandates across a wide range of investment strategies. Standard Life, the pensions and savings business, had record flows during the first nine months of the year, demonstrating further our strength and diversity,” he said.
But what the new set-up did not need in its formative period was a big withdrawal of funds. As Gilbert extended his hospitality at Davos this year, that is exactly what he was facing.
One of Aberdeen’s biggest chunks of business at the time of the merger was the $153 billion it managed for the Scottish Widows insurance business of Lloyds Banking Group. The potential problem — highlighted as a risk in the course of the merger process — was that Aberdeen had a big competitor to the Widows operation, in the form of Standard Life’s own insurance business.
A couple of weeks after Gilbert had shaken the snow off his shoes, a thunderbolt struck. Lloyds announced that, after a review, it was going to terminate its Widows deal with Standard Life Aberdeen, citing competition issues. He faced the prospect of losing his biggest client — after a year’s notice that Lloyds was obliged to give — calling into question the logic of the merger and the strategic direction it was taking. The company’s London quoted shares bombed.
But Gilbert, the consummate deal-maker, had one card up his sleeve, and he played it last week. In a $4.5 billion deal, he and Keoch sold the Standard Life insurance business to Phoenix Group, the UK insurer in which it will also get a 20 percent stake, potentially ending the competition issue with Lloyds and leaving it in a position to retain the business it thought it had lost.
“The deal represents a logical next step in Standard Life Aberdeen’s journey to build a world-class investment company,” he told Arab News.
“It is also a great opportunity for wider collaboration as the asset manager of choice for Phoenix, which sees further significant consolidation opportunities. With the foundations of a world-class investment company in place, we look forward to capitalizing on the opportunities that we see ahead of us while continuing to deliver for our shareholders,” he said.
But will it be enough to get the Lloyds business back? That is not certain.
“In terms of Lloyds, we still have a good relationship with them; we will continue to manage money for them at least for another 12 months, if not longer, and will aim to deliver the strong performance and good client service they highlighted we provide. Whether the Phoenix transaction will influence Lloyds’ decision — they highlighted competition as the reason for carrying out their review — we will need to wait and see,” Gilbert said.
If the jury is still out on the final shape of the asset portfolio, it seems the Middle East will remain a high-priority destination for SLA. Gilbert has always been an enthusiast for emerging markets, opening an Aberdeen office in Singapore in 1992, and, in 2016, taking his first step in the Arabian Gulf with an office in the Abu Dhabi Global Market (ADGM) free zone in the UAE capital.
“We’re happy with how the business is progressing. We’ve got a long track record in opening international offices and believe that it’s important to have resources on the ground where our clients are. So opening a local presence in the region, and in Abu Dhabi, in particular, has been vindicated. We are seeing traction across a number of strategies, particularly emerging market debt and real estate,” he said.
When the ADGM office opened, Gilbert said that the low oil price was not a deterrent to doing business in the region, and his macro-outlook remains unchanged. “The global economy seems to be doing fine, with only a handful of countries in recession. This should support oil prices which the Middle East is so reliant on. But the focus needs to remain on diversifying economies and spending on infrastructure,” he said.
Gilbert believes that Saudi Arabia is the “key market” in the region, but does not have any immediate plans to open there, happy to serve Saudi investors from the Abu Dhabi base they are already familiar with. But he is aware of the opportunities Saudi will present under the Vision 2030 strategy to transform the economy away from oil dependency.
“The reforms seem to be going in the right direction and will create many opportunities if the implementation is done right,” he said.
Does he believe the recent anti-corruption drive in the Kingdom will deter foreign investors from involvement in the economic transformation, as some critics have suggested? “For now, no. It all depends on implementation. If they [Saudi policymakers] get it right, it will help foreign direct investment. If they get it wrong, there will be a risk,” he said.
But, whatever the investment opportunities at home, he thinks that Gulf investors will still have an appetite for the kinds of investment products they have traditionally sought.
“For our Middle East clients, we think European real estate, in particular residential and logistics assets, represent good value. I also think there’s still tremendous value in emerging markets, particularly emerging market debt,” he said.
There is a new spirit abroad in the UK and global financial sector, with pressure rising on executives with big salaries and bonus schemes. It looks like Gilbert and Skeoch will have to concede some ground to shareholder critics on that front.
But it’s unilikely the cost-cutting will extend to the Aberdeen Cafe in Davos, which Gilbert can surely write off as a problem-solving profit center.


Kuwait plans region’s first city for electric carmakers

Kuwait plans region’s first city for electric carmakers
Updated 01 August 2021

Kuwait plans region’s first city for electric carmakers

Kuwait plans region’s first city for electric carmakers
  • Kuwait Ports Authority noted that electric carmakers do not use local distributors or dealers

DUBAI: Kuwait Ports Authority (KPA) has approved a proposal to build the Middle East’s first city to serve electric vehicle manufacturers, the authority said in a statement on Sunday.

The statement does not make clear where the project, called EV City, will be located.

The design and construction tendering process will be during the 2011/22 fiscal year, said KPA General Manager Yousef Al-Abdullah Al-Sabah.

KPA noted that electric carmakers do not use local distributors or dealers and sell their vehicles directly to consumers, adding that it was common for ports to provide certain infrastructure to manufacturers.

“KPA is able to provide all port and logistics services to the biggest global companies manufacturing electric cars,” Sabah said, adding that the project was in line with Kuwait’s Vision 2035 economic diversification plan.

The Public Investment Fund, the sovereign wealth fund of Saudi Arabia, has made huge gains after it invested more than $1 billion in electric carmaker Lucid in 2018.

Lucid Group listed last month after a merger with a blank check company, Churchill Capital Corp IV, in February in a deal that gave the combined company a pro-forma equity value of $24 billion. PIF owns 62.7 percent
of Lucid.


Saudi budget airline expands flights to Bisha

Saudi budget airline expands flights to Bisha
Updated 01 August 2021

Saudi budget airline expands flights to Bisha

Saudi budget airline expands flights to Bisha

RIYADH: Saudi Arabia’s budget airline flyadeal on Sunday launched operations from Dammam to Bisha.

The addition of the new destination to the company’s flight network is part of its expansion plans.

It is a pure low-cost airline, with passengers charged for meals and checked luggage, a model that has so far not had major success in the Middle East beyond UAE-headquartered Air Arabia. The Saudi government owns the airline through state carrier Saudia.

Ahmed Al-Barahim, executive vice president for commercial and customer affairs, vowed to ensure good service for passengers.

He said the airline will continue to expand its fleet and flight network.

Fahd Al-Harbi, CEO of Dammam Airports Co., said healthy competition between airlines will support the Kingdom’s drive to boost domestic tourism.


Saudi Arabia’s net foreign assets rebound from 10-year low on higher oil sales

Saudi Arabia’s proceeds from sales of crude oil increased with the global oil industry gradually recovering from the impact of the coronavirus disease (COVID-19). (Reuters/File Photo)
Saudi Arabia’s proceeds from sales of crude oil increased with the global oil industry gradually recovering from the impact of the coronavirus disease (COVID-19). (Reuters/File Photo)
Updated 01 August 2021

Saudi Arabia’s net foreign assets rebound from 10-year low on higher oil sales

Saudi Arabia’s proceeds from sales of crude oil increased with the global oil industry gradually recovering from the impact of the coronavirus disease (COVID-19). (Reuters/File Photo)
  • The value of Saudi Arabia’s oil exports in May increased by 147 percent to just over SR60 billion from a year earlier

RIYADH: Saudi Arabia’s net foreign assets rose 2 percent in June, recovering slightly from their lowest level in more than a decade as the Kingdom’s proceeds from sales of crude oil increased with the global oil industry gradually recovering from the impact of the coronavirus disease (COVID-19).

Data from the Saudi Central Bank (SAMA) showed the foreign assets — a measure of its ability to support its dollar-pegged currency — rose by SR34 billion ($9.1 billion) to SR1.65 trillion from May to June. Total assets increased by SR16.18 billion to SR1.842 trillion, the central bank said on Saturday.

The value of Saudi Arabia’s oil exports in May increased by 147 percent to just over SR60 billion from a year earlier, while non-oil exports rose by 70 percent, the General Authority for Statistics showed last month.

The recent decline in Saudi Arabia’s foreign reserves to the lowest level in a decade was partly due to a lag between import payments and export receipts, the SAMA’s governor told Reuters last month.

The ratio of SAMA’s total assets at the end of July increased by 0.8 percent over the previous month and amounted to SR1.842 trillion. The rise in total assets is due to the rise in investments in securities abroad, which amounted to SR1.13 trillion, an increase of 0.5 percent over the previous month. The value of foreign exchange amounted to SR271 billion, an increase of 0.2 percent.

Net foreign assets declined significantly in 2020 as lower oil income strained finances and officials transferred $40 billion to the Kingdom’s sovereign fund to fuel an investment spree. The indicator — which topped $700 billion in 2014 after an oil boom increased savings — now stands at SR1.66 trillion.

The state’s general reserve declined during the period 2016 to 2020 from SR640 billion to SR358 billion, due to the increase in projects as a part of the Vision 2030 reform plans. The state is pouring significant funds on projects which will be compensated by future income, Zaed Alfaded, a financial analyst, told Arab News. These income streams are expected to increase with the country diversifying its economy away from oil and its price fluctuations, he added.

The government’s current account dipped from SR89 billion to SR52 billion, and then rose again to SR70 billion, as the government spent on its urgent requirements, Alfaded said.

Central bank data showed on Saturday that the issuance of SAMA bills, an indicator of increased lending to local banks, also declined, which Alfaded attributed to the bank’s plans to contain inflation and direct customers to save and invest. 

This strategy, he said, will reflect positively on the markets for trading in financial assets and other investment assets in the Saudi economy.


Saudi Arabia eyes global tie-ups to tap $20bn in cultural opportunities

In the wake of the G20 meeting last year, Saudi Arabia added culture to the forefront of its investment agenda. (Social media)
In the wake of the G20 meeting last year, Saudi Arabia added culture to the forefront of its investment agenda. (Social media)
Updated 01 August 2021

Saudi Arabia eyes global tie-ups to tap $20bn in cultural opportunities

In the wake of the G20 meeting last year, Saudi Arabia added culture to the forefront of its investment agenda. (Social media)
  • Public-private partnership seen as a means to increase sector’s contribution to GDP

DUBAI: Saudi Arabia is seeking partnership with global partners including leading international museums as it sees its culture sector generating $20 billion in revenues and creating 100,000 jobs, while contributing 3 percent to its gross domestic product (GDP), a senior official said.

In the wake of the G20 meeting last year, Saudi Arabia added culture to the forefront of its investment agenda. The Ministry of Culture, which was established three years ago in the hopes of promoting cultural growth and supporting Vision 2030, sees that the sector has already attracted the interest and engagement of private companies both locally and abroad, Rakan Altouq, head of strategy and policy at the Saudi Ministry of Culture, said in an interview on Sunday.

In addition to the public sector, the private sector is a vital contributor to cultural development and Saudi Arabia will benefit from this new strategy, as it will lead to an increase in its economy. As part of the Ministry of Culture, all 16 sectors with 11 dedicated commissions are engaged now to prepare the groundwork for economic activity. 

The Cultural Development Fund, created by the Ministry of Culture last year, is also a vital tool for bridging the financial gap that exists between public and private sector funding for cultural programs. By using the Cultural Development Fund, a bridge of capital will be provided, he said. Through Invest Saudi and the Shareek program that has been announced across the private sector engagement in Saudi Arabia, all of the targets they have developed cannot be achieved without private capital, and they are contributing to creating the right conditions for capital to invest in the culture sector.

Altouq said that the culture sector should not be evaluated in the same way as other more publicly owned sectors. Nonprofit organizations conduct many private activities, such as the visual arts sector, in the country. Further opportunities exist for establishing infrastructure in digital platforms; such investments have already been initiated by media and other regional companies. 

In the museum sector, the ministry has held numerous discussions with its partners around the world. Soon, the dedicated museum of Saudi Arabia will launch its strategy and seek partnerships with other museums around the world. The Museum Commission will launch its own communication strategy in the coming months to further develop that.

In the national cultural strategy, three main aspirations are outlined: Culture as a way of life, culture as an economic growth tool, and culture as an exchange mechanism among cultures.

As a first step, culture has been developed as a lifestyle in Saudi Arabia through connecting local communities to ensure that all citizens and residents have access to an extraordinary range of diverse cultural offerings in the region while preserving the rich cultural heritage. As for the culture for economic growth, culture will be seen in creative industries, which will allow Saudi Arabia to witness an increase in its GDP by 3 percent by 2030. Lastly, culture for global exchange is engaging the Kingdom and participating in international platforms such as the G20 and UNESCO.     


Saudi Arabia’s Digital Government Authority approves first regulatory framework

It will work on developing the digital capabilities and talents of public sector employees. (Supplied)
It will work on developing the digital capabilities and talents of public sector employees. (Supplied)
Updated 01 August 2021

Saudi Arabia’s Digital Government Authority approves first regulatory framework

It will work on developing the digital capabilities and talents of public sector employees. (Supplied)
  • The framework is the first milestone after the approval of the Saudi Cabinet in March to launch the authority

RIYADH: Saudi Arabia’s Digital Government Authority (DGA) on Sunday said its board of directors approved the first regulatory framework of the digital government.

“The regulatory framework developed by DGA for the digital government will be the basis on which the authority will develop future regulations for the digital government,” DGA Gov. Ahmed Mohammed Al-Soyyan said in a statement. “The framework includes a set of principles, policies, standards, and user guides.”

He added that the DGA is seeking to issue regulations, policies, and standards that contribute to creating a regulatory environment, which enables reaching advanced levels of maturity in the government digital transformation, unify and institutionalize the concept of government policies and standards, provide recommendations to government agencies during implementation, and ensure the adoption of unified tracks for the development of government digital services.

The framework is the first milestone after the approval of the Saudi Cabinet in March to launch the authority. Abdullah Al-Swaha, the Saudi minister of communications and information technology and chairman of the National Digital Transformation Unit, told Arab News’ sister publication Asharq Al-Awsat in an earlier interview that the DGA will help in achieving key objectives, most important of which is augmenting returns on government digital assets and investments. It will also work on developing the digital capabilities and talents of public sector employees.

The framework is based on eight essential principles, including the “Once-Only Principle,” “Digital by Design,” and the “Mobile First.” In addition, it encompasses the Digital Government Policy, which enables and accelerates the sustainable digital transformation of the government sector and enables the successful implementation of the strategic directions of the digital government, DGA said in the statement.

The Digital Government Policy is supported by five sub-policies, including digital governance, it added.

DGA said in the statement that it aims to support the efforts of the government agencies through developing plans, programs, indexes, and measurements related to the works of digital government and integrated digital government services, as well as the government digital market platform. DGA is also responsible for regulating operational, administrational processes, related projects and monitor compliance, it said.