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Thursday, June 6, 2024
BusinessBlackRock ventures into Saudi Arabia with Trillion-Dollar investment platform

BlackRock ventures into Saudi Arabia with Trillion-Dollar investment platform

– Published on:

If you were to consult conspiracy theorists about who they believe “runs the world,” they’d likely mention global banking behemoths like Citigroup, Bank of America, and JPMorgan Chase, alongside oil titans such as Exxon Mobil and Shell. Consumer goods giants like Apple, McDonald’s, and Nestle might also make their list.

Yet, in a surprising twist, a report by The Economist newspaper suggests that one company unlikely to feature in conspiracy theories is BlackRock, an investment management firm relatively obscure outside financial circles. However, it holds the largest stake in all the aforementioned corporations.

Black Rock

BlackRock boasts ownership in nearly every publicly traded company worldwide, not just in the United States but globally. Its reach extends across bonds, sovereign debt, commodities, hedge funds, and more.

It’s aptly hailed as the world’s largest investor, managing $10.5 trillion in assets directly and overseeing another $11 trillion through its Aladdin trading platform.

On its official website, BlackRock describes itself as a leading provider of investment, consulting, and risk management solutions, emphasizing its role as a “fiduciary to our clients”. The company invests for the future on behalf of its clients, fosters its employees’ growth, and supports local communities.

According to Bloomberg, BlackRock offers investment management services to institutional clients and individual investors through various tools. Its services encompass fund management, risk management, and assistance to governments, corporations, and institutions worldwide.

Founded in 1988 by eight entrepreneurs, including Larry Fink, Susan Wagner, and Robert Capito, BlackRock set out with a vision to leverage technology to revolutionize the investment management industry.

Initially focused on providing risk management and fixed-income investment solutions to institutional clients, the company swiftly expanded its offerings to include equity strategies and investment products for individual investors, according to Business Model Analyst.

As a global investment management juggernaut with trillions in assets under management, BlackRock has “revolutionized the way investment is managed,” with its business model serving as the cornerstone of its success, as per the same source.

In the years following its inception, part of the company’s triumph stemmed from its provision of “passive” investment products like exchange-traded funds (ETFs), as noted by The Economist.

This sector is experiencing rapid growth, with BlackRock spearheading competition, notably through its “iShares” brand. Through iShares, the company channels billions of dollars in fees from clients ranging from Arab sovereign wealth funds to small investors.

Another factor contributing to BlackRock’s success is its adept risk management in its actively managed portfolio. For instance, it was an early innovator in mortgage-backed securities.

Not only did BlackRock sidestep the need for a bailout amidst the tumult following Lehman Brothers’ collapse, but it also advised the US government and others on sustaining the financial system during the darkest days of 2008. Moreover, it acquired profitable money management units from distressed financial institutions in the aftermath of the crisis.

BlackRock and Saudi Arabia

In its latest ambitious move to fortify ties and secure investment mandates in the Middle East, BlackRock unveiled plans for a new investment platform, backed by up to $5 billion from the Saudi sovereign wealth fund.

This follows last summer’s appointment of Amin Nasser, CEO of Saudi Aramco, to its board of directors, signaling its commitment to strengthening partnerships in the Kingdom, according to CNBC.

The Public Investment Fund and BlackRock announced the signing of a memorandum of understanding, wherein the company will establish a multi-asset investment platform in Riyadh, supported by an initial injection from the Saudi Fund, contingent upon meeting specified criteria.

The two entities underscored that the platform would catalyze capital markets growth in Saudi Arabia, with an investment team based in Riyadh tasked with securing additional funds domestically and internationally.

Prior to this announcement, the New York City Employees Retirement Fund urged BlackRock shareholders to vote against electing Saudi Aramco’s CEO to the company’s board of directors, citing potential conflicts of interest regarding its decarbonization strategy and human rights concerns.

However, BlackRock defended Nasser’s independence, citing his extensive corporate management experience, insight into energy transition, and international business strategy acumen. Despite past questions about its relatively large board, BlackRock’s directors easily secured re-election last year.

The asset management giant has had longstanding ties with Saudi Arabia, confirming its commitment to the country even amidst the controversy surrounding journalist Jamal Khashoggi’s killing in 2018, according to the Financial Times.

In 2022, the Economic Times reported that the company seeks more infrastructure deals in Saudi Arabia and the wider Gulf region, alongside investments in regional private companies, according to an executive.

BlackRock led efforts to purchase a $15.5 billion stake in a gas pipeline company affiliated with Saudi Aramco last year, following its acquisition of a stake in Abu Dhabi National Oil Company’s pipeline assets two years prior.

Stephen Cohen, BlackRock’s head of Europe, the Middle East, and Africa, expressed the company’s interest in such opportunities, noting their exploration of private market opportunities and infrastructure investments across the region.

Cohen emphasized BlackRock’s pursuit of “transition financing” to support long-term sustainable energy projects aimed at reducing carbon emissions, aligning with the global shift toward environmental sustainability.

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Qamar Munawer
Qamar Munawer
Associate Editor at The Eastern Herald. Ar. Qamar Munawer is currently at Brandenburgische Technische Universität Cottbus-Senftenberg in Germany.

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