BlackRock to launch Saudi investment firm after $5bn deal with Riyadh

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BlackRock has struck a deal with the Saudi Arabian government to open a multi-class investment firm in Riyadh, anchored by a $5bn mandate from the kingdom’s Public Investment Fund.

BlackRock Riyadh Investment Management will be a wholly owned subsidiary of the $10.5tn US asset manager. Riyadh-based professionals will manage funds that invest primarily in Saudi Arabia but also the rest of the Middle East and north Africa.

The goal is to attract additional overseas capital to Saudi Arabia and deepen its capital markets through a range of investment funds managed by BlackRock.

The move is the latest effort by the world’s largest money manager and its global competitors to build ties and win investment mandates in the Middle East. BlackRock last summer added Amin Nasser, chief executive of state oil company Saudi Aramco, to its board of directors.

“We are excited to build on the deep partnership we have developed with PIF over many years to launch this first-of-its-kind international investment management platform in Saudi Arabia,” BlackRock CEO Larry Fink said in a statement. “Saudi Arabia has become an increasingly attractive destination for international investment . . . and we are pleased to offer investors from around the world the opportunity to take part.”

Despite a brief pullback after the 2018 murder of journalist Jamal Khashoggi, western financiers have flocked to Riyadh in recent years, hoping for a share of the $700bn PIF’s efforts to broaden the Saudi economy beyond fossil fuels. But Saudi Arabia has struggled to attract foreign direct investment to support its ambitious transformation plans.

There has also been an influx of money managers, particularly hedge funds, into Abu Dhabi, where the government is using its $1tn sovereign wealth fund and large sovereign investors as draws to help build up the city as a world financial centre.

BlackRock and the PIF said on Tuesday that they had signed a non-binding memorandum of understanding that calls for the sovereign fund to invest up to $5bn in stages as the new firm hits agreed milestones.

The money will act as seed capital for a variety of funds invested in public equities and bonds as well as alternative assets, such as private credit and infrastructure. The deal will add about a dozen people to BlackRock’s headcount in Riyadh, which is currently less than 20 people, according to people familiar with the plans.

Yazeed Al-Humied, PIF deputy governor, described the fund’s relationship with BlackRock in a statement as “well-established and growing”, and said the partnership “represents a step forward in PIF’s work in making the Saudi investment and asset management market more internationally diverse and more dynamic”.

Fink and several other top BlackRock executives are in Riyadh this week for the signing of the agreement, which was also attended by PIF governor Yasir Al-Rumayyan, as well as meetings with potential clients and investment targets.

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