A New Saudi Mega Pension Institutional Investor is on the Horizon
Posted on 06/17/2021
At greater frequency, Middle Eastern governments are looking to consolidate state-owned entities with goals of reducing organizational costs and benefit from economies of scale. The Saudi Cabinet approved the merger of two state-run pension and unemployment insurance funds into an entity with billions in local and foreign equities. Saudi Arabia’s Public Pension Agency (PPA) and the General Organization of Social Insurance, also known as GOSI, are to merge into one institution.
Both GOSI and the PPA are major investors in Saudi Arabian companies, with their names visible in shareholder top ownership rankings. They also hold shares in U.K. companies like HSBC Holdings and AstraZeneca. The pension investors also invest in bonds and real estate. There is even some allocation to hedge funds and private equity funds by Hassana Investment Company, an investment unit of GOSI. More than 50% of PPA’s investment portfolio is in the Saudi stock market, including 67 companies and three funds. The PPA invests in over 19 non-listed companies and in National Debt Management Center issues of sukuk and bond. In 2009, the PPA formed the Al Ra’idah Investment Company (RIC), a Saudi Public company. RIC is a player in property development in the Saudi market.
In 2019, UAE-based GEMS Education and Hassana formed a joint venture to expand the education sector in Saudi Arabia.
There are estimates the combined pension powerhouse in Saudi Arabia could be around US$ 250 billion in assets.
Saudi Institutional Investor Heavy Hitters
This new entity will give support to the Saudi public institutional investor space which consists of KAUST endowment, Saudi Central Bank, Saudi Arabia’s Public Investment Fund (PIF), and Wisayah Investment Company (the manager of Saudi Aramco’s massive pension funds). Wisayah is led by its CEO, Sheila Al-Rowaily who started in the role in 2019. Wisayah allocates money to investment firms and directly invests in debt, equity, and real assets.