1 00:00:02,520 --> 00:00:09,400 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. It used to be 2 00:00:09,480 --> 00:00:12,440 Speaker 1: that when money managers in the US needed to raise capital, 3 00:00:12,600 --> 00:00:14,440 Speaker 1: there was a surefire source for it. 4 00:00:14,640 --> 00:00:18,759 Speaker 2: They would go to Abu Dhabi, Cutter and they would. 5 00:00:18,520 --> 00:00:23,400 Speaker 3: Maybe spend an afternoon a couple hours with the most 6 00:00:23,480 --> 00:00:25,639 Speaker 3: important people they needed to see and then leave with 7 00:00:25,720 --> 00:00:26,880 Speaker 3: these massive checks. 8 00:00:27,120 --> 00:00:29,880 Speaker 1: Heather Peerlberg is a senior reporter on the Wealth team 9 00:00:29,880 --> 00:00:30,520 Speaker 1: at Bloomberg. 10 00:00:30,920 --> 00:00:37,199 Speaker 3: I cover everything from billionaires to the latest trends on 11 00:00:37,280 --> 00:00:40,120 Speaker 3: Wall Street and everything in between. 12 00:00:40,400 --> 00:00:43,320 Speaker 1: And she says, the breezy way Wall Street has found 13 00:00:43,320 --> 00:00:46,240 Speaker 1: money in the Gulf, zipping between meetings with sovereign wealth 14 00:00:46,240 --> 00:00:50,080 Speaker 1: funds in Saudi Arabia and Cutter and the UAE is changing. 15 00:00:50,320 --> 00:00:52,080 Speaker 2: Things are completely different now. 16 00:00:52,840 --> 00:00:57,760 Speaker 3: Now they are really being asked and sometimes kind of 17 00:00:57,800 --> 00:01:01,400 Speaker 3: required to do a lot more in the Middle East. 18 00:01:01,760 --> 00:01:03,520 Speaker 2: It's a complete shift. 19 00:01:06,200 --> 00:01:09,119 Speaker 1: Today on the show, the shifting power dynamics between Wall 20 00:01:09,120 --> 00:01:12,319 Speaker 1: Street and the Middle East and what those changes mean 21 00:01:12,360 --> 00:01:16,800 Speaker 1: for the region, for geopolitics and for investors. I'm David 22 00:01:16,800 --> 00:01:24,199 Speaker 1: Gera and this is the big take from Bloomberg News. 23 00:01:25,040 --> 00:01:28,240 Speaker 1: Heather Perlberg told me she noticed something had changed about 24 00:01:28,240 --> 00:01:31,120 Speaker 1: the relationship between US asset managers and the Middle East. 25 00:01:31,280 --> 00:01:33,560 Speaker 1: On a recent reporting trip to the Gulf. 26 00:01:33,600 --> 00:01:35,920 Speaker 3: When I was down there, I spend time in Doha, 27 00:01:36,200 --> 00:01:36,959 Speaker 3: I spend time. 28 00:01:36,840 --> 00:01:39,720 Speaker 2: In Dubai and Abu Dhabi, and. 29 00:01:39,720 --> 00:01:44,120 Speaker 3: Almost everyone I talked to had mentioned a kind of 30 00:01:44,200 --> 00:01:48,559 Speaker 3: shift in the power dynamic. The intermediaries who are helping 31 00:01:48,640 --> 00:01:51,880 Speaker 3: raise money for the biggest US investors. We're talking about it. 32 00:01:52,240 --> 00:01:55,680 Speaker 3: So it feels when you're in the region, almost palpable 33 00:01:56,200 --> 00:01:59,880 Speaker 3: that they are in this position of power that they 34 00:02:00,000 --> 00:02:04,040 Speaker 3: they really have never been in like this quite before. 35 00:02:04,480 --> 00:02:07,040 Speaker 1: Heather says that there are a few reasons for this shift. 36 00:02:07,400 --> 00:02:10,440 Speaker 1: One is that increasingly the sources that US based money 37 00:02:10,440 --> 00:02:12,960 Speaker 1: managers have tapped for funding are running dry. 38 00:02:13,520 --> 00:02:17,280 Speaker 3: We have a situation in the US where a lot 39 00:02:17,320 --> 00:02:21,680 Speaker 3: of the longtime large institutional investors like the US pension 40 00:02:21,720 --> 00:02:25,160 Speaker 3: plans are kind of tapped out. 41 00:02:25,600 --> 00:02:27,920 Speaker 2: They don't have much money to give. 42 00:02:28,400 --> 00:02:31,919 Speaker 1: But US based asset managers like JP Morgan, Goldman, Sachs, 43 00:02:31,960 --> 00:02:35,120 Speaker 1: and Lazard are not willing to just stop growing. 44 00:02:35,480 --> 00:02:38,040 Speaker 3: So the only way these guys are going to keep 45 00:02:38,080 --> 00:02:41,480 Speaker 3: growing is if they continue to suck in money from 46 00:02:41,560 --> 00:02:44,240 Speaker 3: the biggest institutional players in the world. 47 00:02:44,240 --> 00:02:46,919 Speaker 1: And Many of the biggest institutional players in the world 48 00:02:46,960 --> 00:02:50,400 Speaker 1: are Middle Eastern sovereign wealth funds, which have a lot 49 00:02:50,480 --> 00:02:55,720 Speaker 1: of money. Altogether, they're worth nearly four trillion dollars, which means. 50 00:02:55,600 --> 00:02:57,280 Speaker 2: You have the money, you can make the rules. 51 00:02:58,360 --> 00:03:00,200 Speaker 1: Rules like lower fees. 52 00:03:00,440 --> 00:03:06,040 Speaker 3: So there used to be this very typical fee structure 53 00:03:06,320 --> 00:03:09,400 Speaker 3: that was known as two and twenty, so the private 54 00:03:09,400 --> 00:03:13,120 Speaker 3: equity firms and hedge funds would get a management fee 55 00:03:13,240 --> 00:03:17,520 Speaker 3: and then they would get a percentage of profits twenty percent. 56 00:03:18,000 --> 00:03:22,320 Speaker 3: That has been kind of fading over time and now 57 00:03:22,480 --> 00:03:23,920 Speaker 3: essentially thrown out the window. 58 00:03:24,520 --> 00:03:27,720 Speaker 2: So these funds are now saying, well, we're not we're 59 00:03:27,720 --> 00:03:28,760 Speaker 2: not doing that anymore. 60 00:03:29,400 --> 00:03:32,639 Speaker 3: We're going to pay you lower management fees and we're 61 00:03:32,639 --> 00:03:34,399 Speaker 3: going to take more of the profits. 62 00:03:34,680 --> 00:03:37,480 Speaker 1: And in some cases they're saying, the help with paying 63 00:03:37,480 --> 00:03:40,120 Speaker 1: you to invest our money for us. We want in 64 00:03:40,160 --> 00:03:42,760 Speaker 1: on the deal sheet alongside you. We want to be 65 00:03:42,840 --> 00:03:43,720 Speaker 1: co investors. 66 00:03:44,040 --> 00:03:48,040 Speaker 3: They want to be kind of flush left in this 67 00:03:48,040 --> 00:03:51,040 Speaker 3: this coveted position when the deals are written up. 68 00:03:51,520 --> 00:03:53,960 Speaker 2: They want their name in lights. 69 00:03:54,080 --> 00:03:58,080 Speaker 3: They want to have kind of street cred for working 70 00:03:58,160 --> 00:04:01,720 Speaker 3: behind the scenes on putting these deals together so they 71 00:04:01,800 --> 00:04:04,960 Speaker 3: can become more relevant on Wall Street and in the 72 00:04:04,960 --> 00:04:06,200 Speaker 3: broader investing world. 73 00:04:06,600 --> 00:04:09,320 Speaker 1: Heather says, part of the strategy here is just to 74 00:04:09,320 --> 00:04:13,119 Speaker 1: become less dependent on big US firms, which is why 75 00:04:13,160 --> 00:04:15,960 Speaker 1: these sovereign wealth funds have been pushing for another thing, 76 00:04:16,400 --> 00:04:19,400 Speaker 1: they've been asking US asset managers for more when it 77 00:04:19,440 --> 00:04:22,880 Speaker 1: comes to training local talent. US firms had done this 78 00:04:22,960 --> 00:04:25,280 Speaker 1: type of training before, but it used to be that 79 00:04:25,400 --> 00:04:27,080 Speaker 1: they could dictate the terms. 80 00:04:27,320 --> 00:04:29,960 Speaker 3: They would often be able to push back and say no, 81 00:04:30,080 --> 00:04:32,160 Speaker 3: that's too many people, or we're only going. 82 00:04:32,040 --> 00:04:33,719 Speaker 2: To do it for two weeks, not four. 83 00:04:34,000 --> 00:04:37,000 Speaker 3: But now it feels like they're tolerance for it is 84 00:04:37,080 --> 00:04:39,960 Speaker 3: increasing and it's happening more frequently. 85 00:04:40,320 --> 00:04:43,680 Speaker 1: So these sovereign well funds are effectively pushing for people 86 00:04:43,760 --> 00:04:45,599 Speaker 1: in the region to go and work with the Blackstone 87 00:04:45,680 --> 00:04:49,279 Speaker 1: or go and work with another large asset manager exactly. 88 00:04:50,040 --> 00:04:53,960 Speaker 3: And in some cases they're on these investing teams working 89 00:04:53,960 --> 00:04:55,960 Speaker 3: on deals, so they want them to have a better 90 00:04:56,120 --> 00:04:59,560 Speaker 3: understanding of how to do deals themselves so they can 91 00:04:59,600 --> 00:05:04,120 Speaker 3: beco more sophisticated and lean less on the Blackstones of 92 00:05:04,200 --> 00:05:06,360 Speaker 3: the world to be able to make money. 93 00:05:09,120 --> 00:05:11,760 Speaker 1: So what do these shifting power dynamics mean for the future. 94 00:05:11,760 --> 00:05:24,839 Speaker 1: Of the region that's next. Sovereign wealth funds in the 95 00:05:24,880 --> 00:05:27,640 Speaker 1: golf have become more and more powerful than as new 96 00:05:27,680 --> 00:05:31,760 Speaker 1: Bloomberg reporting reveals, they're not afraid to show it in 97 00:05:31,839 --> 00:05:35,000 Speaker 1: exchange providing capital. They want to get more from US 98 00:05:35,040 --> 00:05:39,720 Speaker 1: based asset managers, like more favorable terms, more partnership opportunities, 99 00:05:39,960 --> 00:05:43,960 Speaker 1: and more jobs in the golf. But that transition hasn't 100 00:05:44,000 --> 00:05:44,920 Speaker 1: been without bumps. 101 00:05:45,080 --> 00:05:47,839 Speaker 3: There have been some issues, especially back at the start 102 00:05:47,880 --> 00:05:49,440 Speaker 3: of the Israel Hamas war. 103 00:05:50,080 --> 00:05:53,240 Speaker 1: After October seventh, a number of executives at big US 104 00:05:53,279 --> 00:05:56,480 Speaker 1: asset managers like Larry Fink of black Rock and Mark 105 00:05:56,560 --> 00:06:00,159 Speaker 1: Rowan of Apollo spoke out in support of Israel. You 106 00:06:00,200 --> 00:06:03,120 Speaker 1: can hear how forcefully Rowan responded to that attack in 107 00:06:03,160 --> 00:06:04,760 Speaker 1: an appearance on CNBC. 108 00:06:05,040 --> 00:06:10,039 Speaker 4: This is a group, a mass that believes that the 109 00:06:10,080 --> 00:06:13,840 Speaker 4: Jews should be killed. Read the charter behind every rock. 110 00:06:13,920 --> 00:06:16,440 Speaker 4: You shall seek out the Jews and kill them. This 111 00:06:16,480 --> 00:06:18,400 Speaker 4: is what we're talking about. This is not about a 112 00:06:18,440 --> 00:06:23,200 Speaker 4: political solution or disagreements over how Israel has treated Palestinians 113 00:06:23,200 --> 00:06:25,440 Speaker 4: in the West Bank and Gaza. This is a group 114 00:06:25,480 --> 00:06:28,960 Speaker 4: that is a terrorist group. The inability to actually say 115 00:06:29,000 --> 00:06:33,320 Speaker 4: that is morally confused and bankrupt. 116 00:06:33,720 --> 00:06:37,200 Speaker 1: How did that resonate, How did that threaten to change 117 00:06:37,320 --> 00:06:39,640 Speaker 1: or upset the relationships that have been established. 118 00:06:39,839 --> 00:06:44,320 Speaker 3: Well, the UAE has a relationship with Israel and some 119 00:06:44,440 --> 00:06:48,400 Speaker 3: of the biggest and more sophisticated investors are there. I 120 00:06:48,440 --> 00:06:53,400 Speaker 3: think it gets sticky when you talk about cutters investing. 121 00:06:52,920 --> 00:06:55,760 Speaker 2: Firm Qia, when you talk about Kuwait. 122 00:06:56,120 --> 00:07:00,880 Speaker 3: I think after Larry Fink came out really strongly in 123 00:07:00,960 --> 00:07:05,400 Speaker 3: support of Israel, there were protests. 124 00:07:04,880 --> 00:07:07,680 Speaker 2: Happening in Kuwait, but he did end. 125 00:07:07,600 --> 00:07:10,880 Speaker 3: Up going down there and it didn't seem to be 126 00:07:11,320 --> 00:07:12,960 Speaker 3: any sort of travesty. 127 00:07:13,360 --> 00:07:17,720 Speaker 2: It doesn't seem to curb these relationships. 128 00:07:17,880 --> 00:07:22,360 Speaker 3: It doesn't seem to stop the money flow. It just 129 00:07:22,560 --> 00:07:25,920 Speaker 3: adds nuances that need to be kind of worked through. 130 00:07:26,360 --> 00:07:29,120 Speaker 1: And for the most part, these issues haven't stopped US 131 00:07:29,160 --> 00:07:32,960 Speaker 1: firms from continuing their efforts to court Middle Eastern cash, 132 00:07:33,080 --> 00:07:36,360 Speaker 1: nor have they prevented sovereign wealth funds from increasing their demands, 133 00:07:36,520 --> 00:07:40,040 Speaker 1: from lowering fees to co investing, to asking US firms 134 00:07:40,040 --> 00:07:43,280 Speaker 1: to grow their presence in the region. For instance, take 135 00:07:43,320 --> 00:07:44,520 Speaker 1: Saudi Arabia. 136 00:07:44,560 --> 00:07:47,800 Speaker 3: In Riad, they are really pushing for more of that. 137 00:07:48,120 --> 00:07:52,160 Speaker 3: They're pushing for people to open up headquarters, and sometimes 138 00:07:52,200 --> 00:07:54,960 Speaker 3: deals are contingent on that. They'll say, we'll give you 139 00:07:55,000 --> 00:07:57,560 Speaker 3: money or we'll do this deal, but you have to 140 00:07:57,600 --> 00:08:00,560 Speaker 3: apply for a regional license and little bit of a 141 00:08:00,640 --> 00:08:04,080 Speaker 3: quid pro quo element, and it seems to be working. 142 00:08:05,480 --> 00:08:08,400 Speaker 1: But Heather says, all these moves, well, they might help 143 00:08:08,480 --> 00:08:11,520 Speaker 1: US firms raise cash in the short term, could pose 144 00:08:11,520 --> 00:08:12,720 Speaker 1: issues down the line. 145 00:08:12,880 --> 00:08:15,200 Speaker 3: People used to joke that you could go to Adia 146 00:08:15,720 --> 00:08:18,480 Speaker 3: or Mubada Lah and just sit in the lobby and 147 00:08:18,520 --> 00:08:22,360 Speaker 3: see a rotating cast of US funds going through on 148 00:08:22,800 --> 00:08:27,679 Speaker 3: a random Tuesday. But at this point they are really 149 00:08:27,800 --> 00:08:31,760 Speaker 3: narrowing their relationships, so the sovereign wealth funds are choosing 150 00:08:31,880 --> 00:08:34,400 Speaker 3: fewer managers that they can give more money to. 151 00:08:35,200 --> 00:08:39,040 Speaker 1: Recently, Abu Dhabi's sovereign wealth fund, Mubadla, started its own 152 00:08:39,080 --> 00:08:43,119 Speaker 1: investment arm, effectively cutting out the Blackstones and the Goldmans. 153 00:08:43,360 --> 00:08:45,200 Speaker 1: Do you think that we're going to see that happen 154 00:08:45,320 --> 00:08:47,520 Speaker 1: at other sovereign wealth funds in the region. 155 00:08:47,800 --> 00:08:51,520 Speaker 2: Yeah, Mubadala did start its own investment. 156 00:08:51,240 --> 00:08:54,040 Speaker 3: Arm, and I think part of that is just having 157 00:08:54,040 --> 00:08:58,280 Speaker 3: the wherewithal to do their own deals. They don't need 158 00:08:58,320 --> 00:09:05,400 Speaker 3: to depend on global fund managers to find investments, to 159 00:09:05,480 --> 00:09:08,520 Speaker 3: find a place to put their money, and then they 160 00:09:08,520 --> 00:09:11,959 Speaker 3: don't have to pay fees. So I absolutely think you're 161 00:09:11,960 --> 00:09:14,280 Speaker 3: going to see more of that. Once they figure out 162 00:09:14,280 --> 00:09:16,520 Speaker 3: how to structure these deals and they have the right 163 00:09:16,600 --> 00:09:20,600 Speaker 3: people internally doing it, it makes sense for them to 164 00:09:20,840 --> 00:09:25,960 Speaker 3: kind of skip the middleman and just do these deals themselves. 165 00:09:30,520 --> 00:09:33,079 Speaker 1: This is the Big Take from Bloomberg News. I'm David Gura. 166 00:09:33,440 --> 00:09:36,600 Speaker 1: This episode was produced by David Fox. It was edited 167 00:09:36,640 --> 00:09:39,480 Speaker 1: by Caitlin Kenny and at vaith Nier. It was mixed 168 00:09:39,480 --> 00:09:42,560 Speaker 1: by Robert Williams. It was fact checked by Thomas lu 169 00:09:43,160 --> 00:09:46,320 Speaker 1: Naomi Shaven and Kim Gittelson are our senior producers. Our 170 00:09:46,400 --> 00:09:49,800 Speaker 1: senior editor is Elizabeth ponso N. Cole Beemster Bor is 171 00:09:49,800 --> 00:09:53,479 Speaker 1: our executive producer. Sage Bauman is Bloomberg's head of Podcasts. 172 00:09:53,960 --> 00:09:56,240 Speaker 1: If you like this episode, make sure to subscribe and 173 00:09:56,320 --> 00:09:59,200 Speaker 1: review The Big Take wherever you listen to podcasts. It 174 00:09:59,280 --> 00:10:01,800 Speaker 1: helps people find out show. Thanks so much for listening. 175 00:10:02,040 --> 00:10:02,920 Speaker 1: We'll be back tomorrow.