State Street expands presence in Middle East through Abu Dhabi Global Markets

With Saudi Arabia's Tadawul enticing foreign investors, the third largest asset manager sees opportunity

ADGM to house State Street's second outpost in UAE. Mona Al Marzooqi / The National

US-based State Street, the world's third-largest asset manager that oversees about $2.7 trillion, opened its first office in Abu Dhabi's financial free zone as part of the firm's expansion in the region.

The office, the company's second in the UAE after a 26-year presence in Dubai, is located in Abu Dhabi Global Market.

"This is clearly a geographic area and a market that State Street strongly believes in and where it has been extending a lot of resources and capital," Emmanuel Laurina, head of Middle East and Africa for State Street Global Advisors, told The National.

The asset manager is seeking to leverage opportunities in the region as countries open up their capital markets to outside investors. In June, Saudi Arabia won inclusion in the MSCI emerging markets index, paving the way for an estimated $40 billion of additional flows to the kingdom’s $500bn-plus stock market. State Street, a major index manager, is investing in emerging market-related funds and also looking to see how it can apply its experience as an asset manager to local markets in bonds and equities. MSCI has said Kuwait could be upgraded to emerging market status as soon as next year.

Mr Laurina declined to provide figures on what percentage of the firm's portfolio comes from the Middle East.

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While oil prices are recovering, the finance industry as a whole has been challenged by the previous three-year collapse in crude. However, sovereign institutions and pension funds have provided opportunities for the firm, Mr Laurina said.

“New types of conversations emerged to help [sovereign institutions and pension funds] take a holistic look at their asset allocation and things they could do differently,” he said. As a result, the firm has expanded its services in those areas.

State Street is also buoyed by the growing regional market confidence of institutional investors in the Middle East and North Africa.

In a recent survey, State Street asked them about their outlook for growth and future economic trends in the region. Some 78 per cent of respondents said they were optimistic about their own growth prospects in the Middle East, while 75 per cent of 306 institutional investors surveyed foresee growing inflows into Arabian Gulf-country domiciled funds over the next five years.

“To find this level of concurrence and optimism among major institutions is unusual,” said Liz Nolan, chief executive for the Emea region at State Street and chair for State Street Global Advisors. “The results show there is an almost universally positive outlook and prediction of growth in Mena."

Saudi Arabia, the Arab world's largest economy, was viewed by respondents as an engine of growth. About 83 per cent of those surveyed said the inclusion of Saudi stocks in emerging market indexes was a key driver, while 74 per cent also positively viewed the Saudi Vision 2030 economic reform initiative.