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Finance firms controlling over $5.8 trillion have established their first offices in the Gulf in the nearly eight months since the Iran war disrupted the region’s economies, a sign that money managers are still betting it will remain a source of new cash.
In that time, all the Gulf’s major finance hubs — Abu Dhabi, Doha, Dubai, and Riyadh — have welcomed new investors including Advent, Bain Capital, Capital Group, Man Group, and Singapore’s Temasek. Abu Dhabi has proved to be the most popular destination, both by the number of new office openings and the assets under management of the firms setting up there.
That’s a reflection of Abu Dhabi’s sovereign wealth funds ramping up the pace of dealmaking this year, and the emirate gaining recognition as a booking center for hedge funds. Nearly 20 companies overseeing more than $5 trillion combined have committed to setting up in Abu Dhabi since Feb. 28, with Dubai in second place attracting 10 managers running $670 billion in assets, according to data compiled by Semafor using artificial intelligence analysis of public announcements.
Many firms see this as “the moment to demonstrate their belief in the region’s long-term potential,” said Robert Mogielnicki, founder of Paris-based consultancy Polisphere Advisory. Governments and sovereign wealth funds in the region expect to see this commitment demonstrated as “two-way investment corridors,” with foreign capital coming into the Gulf in return for partnerships with regional, state-controlled investors on global deals.
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For many of those opening in Abu Dhabi, it’s a way to get closer to SWF clients in the region, a long-term bet on the Gulf’s growth, and a potential foothold for further expansion.
New Mountain Capital, which manages $60 billion, opened an office in Abu Dhabi earlier this month as a bet it can be a gateway to a region that will continue to generate more wealth than it can invest domestically, despite the current volatility.
“We approach our business with a long-term perspective at New Mountain, and our decision to establish a local presence reflects our conviction in the Gulf’s growing importance as a global capital allocator and our commitment to serving the region for years to come,” Adam Weinstein, President and COO said in a statement to Semafor.
Abu Dhabi — which fashions itself as the “capital of capital” — uses its wealth to attract foreign investors to the emirate, partnering with global firms on domestic deals and international ones. Mubadala has become the world’s most active sovereign wealth fund this year.
“Abu Dhabi’s attraction endures” despite the conflict, said Hasnain Malik, managing director for Emerging Market Equity & Geopolitical Strategy at research group Tellimer. The emirate offers firms “proximity to sovereign investors, tax free jurisdiction, regulatory framework, time zone, and air transport connectivity, in order of descending importance.”
Other cities in the region have had less success attracting first time entrants this year. Just two firms announced plans to open their first Gulf offices in Riyadh, although one of those was the $518 billion Singapore sovereign fund Temasek, which said it would open in Abu Dhabi at the same time. Riyadh has attracted the biggest names in global finance to the kingdom in recent years, but most of them already had operations elsewhere in the region first. Only one firm, Silicon Valley-based Activate Capital, has said it will set up regional operations in Doha as part of an agreement with the Qatar Investment Authority. The firm is betting that it can use Doha as a hub for scouting investment opportunities across the Global South.
That is indicative of another trend — the Gulf has increasingly become a location for finance firms looking for new markets to drive growth across the wider region. That’s part of what lured Capital Group, which manages $3.3 trillion, to open in Abu Dhabi this year.
“Establishing a presence in Abu Dhabi is an important step in our long-term strategy to accelerate growth globally,” said Benno Klingenberg-Timm, Head of Abu Dhabi Office and Head of Institutional for Europe and Asia, Capital Group. “The current geopolitical environment does not change that long-term commitment.”
Notable
- The Middle East has faced significant challenges from the Iran war, but its financial systems have continued to operate and Abu Dhabi has evolved into a global financial powerhouse, according to sovereign wealth tracker GlobalSWF.
- Still optimistic about its growth potential, Dubai’s financial center started work on a $1.4 billion new district, Bloomberg reported.