The Public Investment Fund will anchor a new State Street Investment Management ETF strategy focused on the Saudi Arabian equity market.
The State Street Saudi Arabia Enhanced Active Equity UCITS ETF, listed in Frankfurt and London, will be the manager’s second PIF-anchored ETF, and the fifth fund globally backed by the sovereign wealth fund. Other Saudi-focused ETF products are listed on exchanges across Asia and Europe.
Yazeed Al-Humied, deputy governor and head of MENA investments at PIF, said the continued partnership with State Street would expand the range of investment products for international investors and support Saudi capital markets.
Speaking to II, Andrew Keegan, head of product for international at State Street, said that Saudi Arabia offers a compelling emerging market growth story with its oil-revenue backed diversification plan and a dollar pegged currency.
He added that the integration of Saudi Arabia into J.P. Morgan’s local currency bond indexes has been a catalyst for the firm’s push into the market.
State Street has been working closely with PIF to assess the potential in the economy and in the equity markets specifically.
“Think about the breadth in the economy, there are a lot more stocks now than there were even a year ago, and PIF has been part of creating that with its support of start-ups and new sectors,” Keegan said. “We’ve conviction in what their plans are, and they have conviction in our investment capability.”
While appetite for direct access to the Saudi markets is currently highest among European investors, the firm is exploring compliant ways to introduce something similar for U.S. investors.
This interest comes despite growing geopolitical pressure in the region and increased financial pressure on Saudi Arabia.
PIF governor Yasir al-Rumayyan told the state-owned television channel Al Arabiya last week that this had led it to “reposition some priorities.”
But despite this backdrop, Keegan said that the Saudi stock market has shown resilience through the recent shocks and investor demand remains intact.
“It is a diversification story, it isn’t going to be for everybody, or the right time for everybody, but as you scour the world for alpha opportunities Saudi continues to be an exciting market,” he said.
