In the past, interest rates were near zero and there was ample liquidity for founders to raise money — whether it was a good company or not. But this was obviously an error, Prince Khaled bin Alwaleed, founder and chief executive of KBW Venturesx, told the FII conference in Riyadh on Thursday.
“I think the model of growth at any cost has definitely been broken. And I think we are thankful for that,” he said.
“I do see a lot of VCs pulling back from that model, a lot of VCs giving advice to founders to start conserving their capital.”
The latest from FII in Riyadh — in pictures
Left to right: Bill Winters, chief executive officer of Standard Chartered, Lorenzo Simonelli, chief executive officer of Baker Hughes, Jennifer Holmgren, chief executive officer of Lanzatech NZ, Matthew Harris, founding partner of Global Infrastructure Partners, Henrik Andersen, chief executive officer of Vestas Wind Systems A/S, Abdulaziz bin Salman, the kingdom's Minister of Energy, and Yousef Gamal El-Din, Bloomberg Television anchor, at the 'Science in Action' panel session at the Future Investment Initiative conference in Riyadh. Bloomberg
Saudi Arabia's Minister of Investment Khalid Al Faleh is pictured during an interview with AFP TV on the sidelines of the annual FII conference in the Saudi capital Riyadh. AFP
Tareq Al Sadhan, chief executive of Riyadh Bank, centre, at the FII conference. Rising energy prices are likely to linger for some time, posing one of the most serious challenges to the global economic recovery and raising the potential risk of social unrest, some of the world's top executives said on the first day of the investment forum. Bloomberg
Joseph Bradley, chief executive of NEOM's Tech and Digital Holding Company, speaks during an interview with AFP on the sidelines of the annual FII conference. AFP
Nadhmi Al Nasr, chief executive officer of NEOM, during a Bloomberg Television interview at the FII conference. Saudi Arabia said global efforts to cut planet-warming emissions must avoid hurting poor countries' economies. Bloomberg
Steven Mnuchin, former US Treasury secretary, attends a Bloomberg Television interview at the conference. Bloomberg
Mr Mnuchin, right, attends a panel session at the conference. Bloomberg
Saudi Arabia's Minister of Energy Abdulaziz bin Salman at the conference. Saudi Arabia could go carbon neutral before its target of 2060 if technology evolves quickly enough, he said, days before the Cop26 climate summit. AFP
Attendees between panel sessions at the FII conference in Riyadh. Bloomberg
A promotional booth for Oceanx at the conference. Bloomberg
Attendees during a break between panel sessions. Bloomberg
Female employees assist a guest at the conference. Bloomberg
VC companies took advantage of near-zero interest rates for a long period of time as central banks tried to minimise shocks to financial markets and boost economic activity during the Covid-19 pandemic.
This led to investors pouring liquidity into start-ups and growing companies to support their expansions.
In the Middle East and North Africa alone, VC funding for start-ups jumped 20 per cent annually to more than $2.3 billion in the first three quarters of 2022, putting it on track to potentially surpass total investments attracted in 2021, a study carried out by Magnitt has found.
Funding reached $512 million in the third quarter of this year, which was the lowest since the first quarter of 2021, the data intelligence
However, in recent quarters, central banks around the globe have aggressively raised interest rates to curb rampant inflation that has significantly increased the cost of funding for investors. Elevated energy and food prices, coupled with rising policy rates have slowed economic momentum.
Governments printing money during the pandemic did not help, as this further fuelled the “growth at any at any cost model”, Prince Khaled said.
However, the current slowdown is a “good thing” from the VC industry’s perspective.
Watch: Iraqi city of Mosul establishes start-up scene
“I think there's a lot more money that is being put on the sidelines for the next, let's say … 12 to 18 months. And I think you're going to see a great amount of quality and capital … deployed in quality companies in the near future,” he said.
Meanwhile, the “new paradigm where money is not free any more” is already here and is “the elephant in the room”, said Saleh Romeih, Softbank's managing partner and Europe, Middle East and Africa head of operating group.
Many investors lost discipline in terms of deploying that capital and the companies themselves did not have to work hard to get that funding, Mr Romeih added.
“However, the risk-free rate, depending on what you consider the risk-free rate to be, is about 4 per cent, probably heading to 5 per cent, or maybe even higher,” he said.
“All risk assets as a result getting repriced … venture capital is going to be repriced as well and I think that's something we need to be mindful of.”
The Birkin bag is made by Hermès.
It is named after actress and singer Jane Birkin
Noone from Hermès will go on record to say how much a new Birkin costs, how long one would have to wait to get one, and how many bags are actually made each year.
At one point, two feature films were in the works, but only German director Werner Herzog’s project starring Nicole Kidman would be made. While there were high hopes he would do a worthy job of directing the biopic, when Queen of the Desert arrived in 2015 it was a disappointment. Critics panned the film, in which Herzog largely glossed over Bell’s political work in favour of her ill-fated romances.
A documentary
A project that did do justice to Bell arrived the next year: Sabine Krayenbuhl and Zeva Oelbaum’s Letters from Baghdad: The Extraordinary Life and Times of Gertrude Bell. Drawing on more than 1,000 pieces of archival footage, 1,700 documents and 1,600 letters, the filmmakers painstakingly pieced together a compelling narrative that managed to convey both the depth of Bell’s experience and her tortured love life.
Books, letters and archives
Two biographies have been written about Bell, and both are worth reading: Georgina Howell’s 2006 book Queen of the Desert and Janet Wallach’s 1996 effort Desert Queen. Bell published several books documenting her travels and there are also several volumes of her letters, although they are hard to find in print. Original documents are housed at the Gertrude Bell Archive at the University of Newcastle, which has an online catalogue.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Girls full-contact rugby may be in its infancy in the Middle East, but there are already a number of role models for players to look up to.
Sophie Shams (Dubai Exiles mini, England sevens international)
An Emirati student who is blazing a trail in rugby. She first learnt the game at Dubai Exiles and captained her JESS Primary school team. After going to study geophysics at university in the UK, she scored a sensational try in a cup final at Twickenham. She has played for England sevens, and is now contracted to top Premiership club Saracens.
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Seren Gough-Walters (Sharjah Wanderers mini, Wales rugby league international)
Few players anywhere will have taken a more circuitous route to playing rugby on Sky Sports. Gough-Walters was born in Al Wasl Hospital in Dubai, raised in Sharjah, did not take up rugby seriously till she was 15, has a master’s in global governance and ethics, and once worked as an immigration officer at the British Embassy in Abu Dhabi. In the summer of 2021 she played for Wales against England in rugby league, in a match that was broadcast live on TV.
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Erin King (Dubai Hurricanes mini, Ireland sevens international)
Aged five, Australia-born King went to Dubai Hurricanes training at The Sevens with her brothers. She immediately struck up a deep affection for rugby. She returned to the city at the end of last year to play at the Dubai Rugby Sevens in the colours of Ireland in the Women’s World Series tournament on Pitch 1.
