Natixis has recently opened an office in Riyadh to penetrate the family office sector and tap into emerging investment opportunities.
The new office is headed by chief executive, Reema Al-Asmari. Having made plans to set up operations in 2019, the company is licensed to offer its entire range of capital market and investment banking services.
‘Our decision to open an office in Saudi Arabia reflects our confidence in the outlook for the economy and the country,’ said said Barbara Riccardi, regional head of Middle East.
‘Family offices are very active and we are targeting this segment specifically and on a global level,’ she said.
Saudi Arabia is also home to some of the largest institutional investors in the world. They have a long track record of investing globally across both traditional and alternative asset classes.
According to Natixis, there has been a surge in cross-border activity over the last couple of years with an increase of international investors coming into the Kingdom, as well as Saudi investors and corporates expanding globally outside Saudi.
The Kingdom’s May announcement of its list of government assets for privatization on its stock market is expected to raise approximately $200bn.
Economic reforms such as these have given rise to an increased demand for hedging, financing and investment needs including engineering and structuring, covering fixed income and equity asset classes.
While Natixis’ focus has always been on financing transactions across the infrastructure and energy sector, as the country opens up it now sees opportunities in new industries. Saudi Arabia’s Vision 2030 has driven the kingdom to diversify its economy with an emphasis on renewables.
Involved in defining a taxonomy to expand the sustainable finance market to include carbon-intensive players, Natixis also sees opportunities in water and environmental infrastructure such as pipelines and utility assets, as well as social accommodation across the healthcare and education sectors.
Family office landscape
Saudi Arabia currently has the largest concentration of family offices in the Middle East. Culturally reticent, it is a sector that is difficult to surmise.
While it is challenging to obtain real data on the estimated size of family offices in the Kingdom, similar to the Aramco story, it is understood as significant. This is simply because of the country’s fundamentals as a wealthy country.
‘It is undoubtedly a very significant market but to get to the bottom of a precise number would be very difficult due to the inherent privacy around wealth managed by family offices,’ said James Pollard, partner at PwC, covering family offices in the region.
‘That said, most of the wealth is still in the first generation, transitioning to the second and that is driving a lot of family office activity and development,’ he said.
Pollard explained that there is also a bigger focus on private investment opportunities and this too is driving family office activity. On the relationship side he also said ‘it is a market that you need to have a long-term view on, you can just simply tap into it.’
Similar to its GCC peers, family offices in Saudi Arabia are much less sophisticated than those in Europe and Asia. Progressively evolving they demand professional services for better wealth management structure and planning.
Most prefer bespoke services to cater to their varied requirements in managing their luxury assets, diversifying their investments and running their business. Historically, family offices have often preferred investing in listed equities and real estate.
However, the allocation is changing. They are also looking to invest away from the industry their family business operates in, as part of their diversification strategy. This trend is expected to continue, particularly with the next generation, Pollard said.