KUWAIT CITY - Investors in the oil-rich Persian Gulf states have repatriated billions of dollars in U.S. investments or shifted those holdings into euro-denominated bonds and real estate, where better investment opportunities are expected, experts say.
Some say the move is political fallout for U.S. money managers being lumped with culpability for American foreign policy, while others say the asset flight is simply an investment decision based on economic uncertainty in the United States.
The estimates are coming from a variety of money management and consulting sources in the region, because hard figures on the flow of money in the Middle East are not available.
"We definitely see a shift, and we see new money going into Europe rather than U.S. assets," said Frank Travis, a consultant with CIC, Kuwait City, a firm that advises a number of institutions including the massive Kuwait Investment Authority, which is believed to hold more than $80 billion in assets.
"They are definitely concerned about the state of the U.S. economy, and there are political issues," he said of his Kuwaiti clients.
Mr. Travis said that while there is an anti-American feeling in the region, he could not comment on whether it had translated into reduced business for U.S. firms.
While many U.S. firms, such as Mellon Financial, London, continue to gather assets in the Gulf region, European firms also are beginning to pick up pace.
"We have had a very good year this year," said Kalil Sharif, deputy chief executive officer at SG Asset Management, Manama, Bahrain. His firm increased assets by 32% this year, while French rival BNP Paribas Asset Management, grew 23%, said Eric Lafeville, head of BNP's business development for the region.
"You hear comments over post-signing ceremony lunches from clients that are anti-American, said Mr. Lafeville. "There is anger at what the U.S. policy is toward the Israeli-Palestinian issue and its aggressive attitude toward Iraq."
But executives at U.S. firms take a different view.
No business lost
"There is no doubt there is antipathy toward the Americans in the region, but from my point of view that has not resulted in any losses" of mandates, said Hugh Dumas, business development director, Middle East, with Franklin Templeton Investments, London. Mr. Dumas said his firm has not lost clients.
Jeff Hilliard, vice president at Putnam Investments, London, declined to comment on the issue, and representatives of other U.S. firms including Goldman Sachs & Co, London, did not return calls by press time.
J.P. Morgan Fleming Asset Management closed its office in Bahrain earlier this year and moved several staff to London, but not because of any political fallout, said Andrew Williams, a director responsible for Middle East marketing with the firm in London.
"We've seen some boycotts of American products in the region," but so far his firm has not been hurt, he said. He declined to confirm any details on assets under management or levels of fund inflows this year.
He refused to comment further on the decision to close the Bahrain office. However, industry sources in Bahrain indicated security might have been an issue.
Western firms operating in the Gulf states have boosted security since the Sept. 11, 2001, terrorist attacks, and security consultants are strongly advising them to take further precautions if the United States and its allies begin a sustained military campaign against Iraq.
Bucking this trend is Mellon Bank, whose investment management unit opened offices in Bahrain this year and now manages more than $1 billion in assets from clients in the region.
"It's an important growth segment for us," said Jamie Brooks, a spokesman with Mellon in London, of the company's Middle East expansion.