Public Investment Fund, Riyadh, Saudi Arabia invested $200 million in State Street Global Advisors’ recently launched Saudi bonds ETF.
The sovereign wealth fund, which has an estimated $925 billion in assets, is an anchor investor in the SPDR J.P. Morgan Saudi Arabia Aggregate Bond UCITS ETF, a news release said.
The exchange-traded fund was launched on Dec. 13 and commemorated at the London Stock Exchange on Jan. 8 with a bell ringing ceremony.
The ETF is the first Saudi Arabia fixed-income undertaking for collective investment in transferable securities ETF in Europe, SSGA said. It is listed on the LSE and Deutsche Borse’s Xetra in Frankfurt.
The fund tracks the J.P. Morgan Saudi Arabia Aggregate Index, a new index that provides investors with exposure to Saudi financial instruments such as liquid, dollar-denominated, Saudi Arabia riyal-denominated government and quasi-government bonds, included sukuk bonds — sharia-compliant instruments.
“PIF continues to create opportunities, open gateways, and enable access to Saudi Arabia’s diverse and dynamic capital market,” Yazeed Al-Humied, deputy governor and head of Middle East and North Africa investments at PIF, said in the release. “PIF’s investment into the first internationally listed fixed-income Saudi ETF further deepens the Saudi market, while attracting investors and strengthening cross-geography partnerships, increasing international investment in Saudi Arabia.”
PIF’s ETF investments include those listed in Hong Kong, Shanghai, Shenzhen and Tokyo.
SSGA is “really focused very much on those markets that we see inherent growth,” Yie-Hsin Hung, CEO, said at a briefing following the ceremony. Saudi Arabia “is a market that we expect is going to be growing at twice the pace of the developed economies around the world.”
State Street has been in the Middle East region for more than 30 years, “and so it’s a long-standing commitment of ours.”
The firm “very much take(s) to heart what our clients are trying to achieve. And so in this case … PIF was very keen to allocate more of their own capital back into the GCC (Gulf Cooperation Council countries) and into Saudi. At the same time, the kingdom itself, with Vision 2030, has been very focused on bringing foreign direct investments and activating their equity and debt capital markets,” Hung added.
Jennifer Taylor, head of emerging markets debt at SSGA, said at the same briefing that there were a number of “catalysts” for launching the fixed-income ETF right now.
Those are an “index inclusion play, which is a gamechanger for both the kingdom and investors alike,” and a ratings upgrade for Saudi Arabia to Aa3 from A1 by Moody’s late last year. “There aren’t that many countries with a double-A rating in the emerging market universe,” Taylor said.
The ETF is available to investors in Austria, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden and the U.K.
SSGA’s Hung, Taylor and other executives were joined at the bell ringing ceremony by PIF’s Al-Humied.
PIF’s investment is just the latest in a string of initiatives for the sovereign wealth fund. Announcements last year include its anchor investment partnerships with the Hong Kong Monetary Authority, Mizuho Financial Group, and with Brookfield Asset Management. In April it signed an agreement to anchor BlackRock’s Riyadh-based investment platform.