(Bloomberg) — Larry Fink of BlackRock Inc. was one of the headliners at the annual Davos-style investment conference in Saudi Arabia in October. Days later, he appeared on a social media post by Abu Dhabi’s $1.5 trillion man, Sheikh Tahnoon bin Zayed Al Nahyan.
Most read from Bloomberg
The $11.5 trillion asset manager that Fink manages recently received approval to set up its regional headquarters in Riyadh. It is also working with Abu Dhabi’s royal family on one of the largest efforts yet to finance the build-out of data warehouses and energy infrastructure.
The largest firms on Wall Street operate in different geographic areas, and top executives often fly to multiple countries while visiting a region. But Riyadh and Abu Dhabi, which are competing to become the Middle East’s top business hub, offer unique opportunities: The cities each hold more than $1 trillion in state assets, making them among the world’s largest sources of capital.
Sheikh Tahnoon – one of Abu Dhabi’s two deputy rulers, the United Arab Emirates’ national security adviser and brother of the president – had conversations with many executives who also spoke at the FII, according to reports on the X Profile of the royal family.
That list included Morgan Stanley CEO Ted Pick, Blackstone Inc. CEO Steve Schwarzman. and Ruth Porat of Alphabet Inc., which is working with Saudi Arabia on an artificial intelligence hub. Meanwhile, Goldman Sachs Group Inc. CEO David Solomon also stopped by Abu Dhabi shortly after his company announced its new office in Riyadh, according to a person familiar with the matter.
The two cities have launched a series of initiatives in their quest for greater global relevance. Riyadh is asking international companies to increase their local presence or risk losing sales. That has prompted the likes of General Atlantic and Goldman to strengthen their operations in the kingdom.
Others are reluctant to make Riyadh their main hub because their employees prefer the UAE lifestyle. To sweeten the deal, Abu Dhabi has also introduced a range of perks, including a lifestyle support program for new backers.
But many companies looking to raise money or close deals, driven by ambitious diversification programs, are trying to keep a foot in both camps.
For example, BlackRock said the new base in Riyadh will help the company expand its operations across the Middle East and not just the kingdom. Goldman maintains a significant presence in both Dubai and Abu Dhabi, and Barclays Plc, which is considering re-entering Saudi Arabia after a decade, said it plans to expand its team in the UAE as well.
Meanwhile, investment bank Lazard Inc., which held sales talks with Abu Dhabi fund ADQ last year, is making a big move in Saudi Arabia, Bloomberg News reports.
While both cities have begun similar moves to lure the world’s biggest companies, recent years have also led to shifting priorities for officials in Riyadh and Abu Dhabi, and the types of partnerships they are looking for.
For example, Saudi Arabia, with its large and relatively young population, is prioritizing projects aimed at developing its infrastructure, which lags significantly behind the UAE.
But with finances tight due to weak oil prices, the country needs to bring in more foreign capital – hence the desire to bring the world’s largest infrastructure fund managers to the country. Case in point: Brookfield Asset Management Ltd.’s new $2 billion Middle East vehicle.
“People came to us asking for money,” Yasir Al Rumayyan, the governor of the kingdom’s nearly $1 trillion public investment fund, said on a panel at the FII last month. “We are now seeing a shift from people who want to take our money to people who want to co-invest.”
Saudi Arabia is also becoming a regional opportunity for investment banks. The kingdom is in the midst of a massive privatization program to raise money to finance investment plans, which has turned Riyadh into a hotspot for initial public offerings.
For Abu Dhabi, where energy wealth exceeds the local economy’s digestion and which already has some of the best infrastructure in the region, the focus is on using these assets to prepare for the post-oil -economy.
Abu Dhabi Investment Authority, the emirate’s $1 trillion endowment fund, continues to invest mainly outside the country. At the same time, the city has attracted some of the largest hedge funds in the world.
That has prompted officials to expand the financial center’s jurisdiction to a neighboring island, in a move that will give it 10 times as much space. Months after billionaire Alan Howard said Abu Dhabi could become a global financial center, Bloomberg News reported that the hedge fund he founded manages more money from the emirate than anywhere else.
Get the Mideast Money newsletter, a weekly look at the intersection of wealth and power in the region.
But here too there is a balancing act.
Bridgewater Associates founder Ray Dalio, the face of Abu Dhabi’s bid to attract hedge fund bigwigs, was in Riyadh for FII. He was spotted in traditional Arab attire ahead of the event and later explained on a panel the reasons behind his ties to the region.
The billionaire was effusive in his praise for Saudi Crown Prince Mohammed bin Salman. “I think His Royal Highness is a great leader,” he said. “In a way, he almost looks like a Deng Xiaoping from China, or a Lee Kuan Yew (from Singapore).”
–With help from Silla Brush, Mark Bergen, Laura Gardner Cuesta, Ben Scent and Siddharth Philip.
