Saudi Central Bank Said to Pull Money From at Least Two Managers

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(Bloomberg) — Saudi Arabia’s monetary authority has pulled billions of dollars from at least two global asset managers in recent months, in a sign that the custodian of one of the world’s deepest pools of capital is growing more selective with deployment. 

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The redemptions started before the onset of the Iran war, according to people familiar with the matter. The withdrawals include a multibillion-dollar redemption from passive index-tracking funds at a single asset management firm this year, according to one of the people, who declined to be identified discussing sensitive information.

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The central bank has reallocated at least some money to higher-performing strategies, according to a person familiar with the matter. It plowed back part of the redemptions from one manager into fixed income products that offer more liquidity, people familiar with the matter said.

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The entity, known as SAMA, manages hundreds of billions of dollars and acts as Saudi Arabia’s primary reserve manager. Its investment portfolio comprises liquid low-risk global assets designed to preserve capital and support financial stability. 

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“SAMA has been increasing its allocations to global asset managers in international markets over recent quarters, in line with its growing reserves,” a spokesperson said. “Where mandates have been reallocated, they reflect outcomes from SAMA’s periodic portfolio review process, conducted in line with conventional Investment management practices.”

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SAMA’s reserves provide a critical buffer for the Saudi riyal’s peg to the US dollar, one of the longest-standing currency arrangements in emerging markets. Maintaining ample foreign assets has been central to investor confidence in the financial system, particularly during periods of market volatility and fluctuating energy prices.

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While Saudi Arabia’s sovereign wealth ambitions are increasingly associated with the Public Investment Fund, SAMA plays a different role.

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Unlike the PIF, which deploys capital into strategic industries, mega-projects and direct corporate stakes, SAMA’s reserves are managed with an emphasis on liquidity, diversification and capital preservation, reflecting its mandate as the custodian of the kingdom’s foreign reserves.

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Saudi Arabia’s foreign reserves have risen amid the conflict, as oil revenue was bolstered by a surge in prices and alternative export routes, though liquidity in the local banking sector has long been constrained by heavy investments in flagship diversification projects.

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The kingdom’s 10 largest listed banks had a loan-to-deposit ratio of 101.8% on average at the end of March, almost double the level of banks such as Goldman Sachs Group Inc. and JPMorgan Chase & Co., according to data compiled by Bloomberg. 

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Total bank credit extended to Saudi Arabia’s public and private sectors from local lenders stood at a record high of 3.4 trillion Saudi riyals by the end of February, a rise of almost 10% from 12 months earlier, central bank data show.

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—With assistance from Mirette Magdy, Loukia Gyftopoulou, Paul Wallace and Abeer Abu Omar.

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