Mumtalakat Diversifies And Keeps Long-Term View

Ashby Monk

Mumtalakat is continuing its diversification strategy. What has traditionally been a holding company and strategic investor for the Kingdom of Bahrain since its establishment in 2006, Mumtalakat seems to be moving more towards the profile of a traditional portfolio investor. Indeed, the fund has been selling some of its 35 commercial stakes in domestic industry to raise cash for a new global investment program.

For example, according to an article in Arabian Business this morning, the SWF will use the proceeds from Aluminium Bahrain’s IPO (and other divestments) to launch a new round of investing. Here’s Mumtalakat CEO Talal Al Zain:

“The proceeds will go into investing, for the time being, more of a liquid portfolio. And when I say liquid, it will be both MENA and global…we have had a lot of discussions with portfolio managers around the globe that we will be directing funds to.”

In other words, this fund may be pulling back a bit from its traditional direct investments (i.e. development focus) and spend more time spreading the asset base around (i.e. heritage and saving focus). That’s an interesting change.

Another interesting tidbit that came up in this article was the impact that private investors are having on the fund’s long-term profile. As I noted the other day, a SWF’s long-term investment horizon is one of its most compelling strategic advantages. However, I’ve also argued that bringing private money in-house (which Mumtalakat has done) erodes this advantage:

“Now, if a SWF is taking in private money, then the investment strategy of the fund is going to have to shift, albeit slightly, towards investments that pay-off in a time-frame that meets private sector interests.”

Not so apparently!

“The CEO indicated that the recent $750m bond issue and the need to pay back borrowers would not shorten Mumtalakat’s investment horizon.”

How is that possible? The bond clearly doesn’t have a permanent duration. Well, maybe accepting private capital doesn’t shorten the time horizon of SWFs but, instead, lengthens the time horizon of private investors? Hmmm.

Actually, sorry, I can’t even convince myself on that one. But all of this is nonetheless very intriguing, as this SWF is clearly aware of its comparative advantage and, moreover, cognizant of the effect that private sector capital could have on its long-term view. That in itself is something to note.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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