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Hasan S. Al Jabri

SAUDI ARABIA - Finance

Capital Idea

CEO, SEDCO Capital

Bio

Hasan Al-Jabri has been a major player in investment banking and corporate finance in the MENA region for over 30 years, holding leading positions in two of the region’s most influential financial institutions, NCB Group and SAMBA. He is a member of the Saudi British Business Council, founding trustee of the Responsible Investing Institute, member of the Global Islamic Finance and Investment Group, and member of the HOPE International advisory board, as well as board member of Alsayidah Khadijah Bint Khouwailid Center, a member of advisory board for Agfund’s micro finance bank under the patronage of HRH Prince Talal Bin Abdulaziz, and board member of Saudi Foras Investment Company. He is a BSc graduate of the American University of Beirut and an executive management program graduate of Columbia University.

“North of USD20 trillion is being invested in an ethical and responsible fashion.“

Over the past several years your assets under management have increased significantly. How has SEDCO Capital changed in the past 2-3 years?

The past two to three years have been interesting. From 2015-16 we have been focused on Saudi Arabian real estate and have been able to conclude decent investments, mainly in defensive income-generating real estate. They end up making about 7% in net returns annually, and as such are a solid products with good yields. This is one way our clients are able to diversify. In the future we see that this will be a promising line of business as well. New regulations within the Capital Market Authority (CMA) will encourage and induce more investments into income-generating Saudi real estate through the real estate investment trusts (REITS) that it has just been announced. This will be an area of great interest to the real estate industry and to investors because you are giving them diversification and access, especially for medium and smaller-sized investors. This will continue to be a very interesting area for us from that angle. We have also participated in build-to-suit real estate opportunities that have been successful. We are continuing to grow our international real estate capability and have concluded transactions in local and international real estate in excess of SAR4.5 billion over the past four years. To help with that, we opened a real estate advisory office in London in 2016 that is focused on international real estate, although the bulk of our international real estate team remains in Jeddah. One of the interesting transactions that we have done in real estate was a build-to-suit school in the US for one of the leading international schools. That school was just completed and 800 students are already enrolled in it. In 2017 the Saudi listed equity market will again be promising for a few reasons. First is the fact that we are hoping that MSCI inclusion of the Tadawul should happen late 2017 or early 2018. We have seen the capital market authority and Tadawul taking all the necessary steps to facilitate the entry of foreign investors by easing the requirement for qualification and changing the settlement period to align it with international norms. Once that happens, we will expect to see sizable international AUMs into the Saudi equity market. Attracting international sophisticated clients into the Saudi market is a very important strategy for us. Our Luxemburg platform has seen growth in assets under management through our distribution arrangements, with large international banks that have sharia-compliant investors or other types of investors who have invested into our funds on that platform. In private equity, we have invested in five different transactions around the world during 2016, and these range from dialysis centers in India to technology in the US and car components in Korea.

What would you have to say about the initial regulations? Were they done the right way?

I fully agree with the acting chairman of the CMA. It has to be done gradually. We have to start somewhere and I have always said that it would be a nice test of the systems to see how comfortable international investors are with the settlement processes. You will only start seeing serious money come in once you are included in the MSCI index; if not it is going to take much longer. Nobody said once they open the market money is going to flow. We will see serious money once we are included for two reasons: the first is that current market prices are at acceptable valuations and that should encourage money to flow into Tadawul. A lot of that money that will come in is through asset managers or directly through institutional investors. These types of investors have clear allocations to emerging markets and that should drive 3-4% of trade allocations to the Saudi market.

What are your plans and expectations for the next year?

We are considering listing our own REITs. This may happen in 1Q2017. We are positioning ourselves to encourage and attract international funds into the local equity market. These are the two major areas while we continue in our growth of the international real estate and private equity portfolios. It will be a busy year. Additionally, it is worth mentioning that we are the pioneers in prudent ethical investing that has been growing globally at a rapid pace. You hear different numbers, but definitely north of USD20 trillion is being invested in an ethical and responsible fashion. Sharia investing is ethical by nature, and we have actually bridged the two industries through prudent ethical investing (PEI). We pioneered this framework and became signatories to the UN principles of responsible investing in 2013. Now, we are seeing that there has been a lot of excitement about the prudent angle that we are bringing to the table. By prudent, we mean the avoidance of excessive leverage, and not investing in structures that are not transparent. We invest in transparent structures that have clear cash-flows and clear assets. With that we are able to produce meaningful profits and gains for our clients. Some of the most significant institutional investors take this approach very seriously. It is worth noting that we have attracted non-sharia investors that are quite conventional but like our performance and the PEI investing methodology. Here you really create jobs, and create business that will be sustainable and result in consistent profits. We are at the corner of sharia compliant and responsible investing, and we are a pioneer in bridging both.

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