Speaker 1: Bloomberg Audio Studios, podcasts, radio news. It used to be
Speaker 1: that when money managers in the US needed to raise capital,
Speaker 1: there was a surefire source for it.
Speaker 2: They would go to Abu Dhabi, Cutter and they would.
Speaker 3: Maybe spend an afternoon a couple hours with the most
Speaker 3: important people they needed to see and then leave with
Speaker 3: these massive checks.
Speaker 1: Heather Peerlberg is a senior reporter on the Wealth team
Speaker 1: at Bloomberg.
Speaker 3: I cover everything from billionaires to the latest trends on
Speaker 3: Wall Street and everything in between.
Speaker 1: And she says, the breezy way Wall Street has found
Speaker 1: money in the Gulf, zipping between meetings with sovereign wealth
Speaker 1: funds in Saudi Arabia and Cutter and the UAE is changing.
Speaker 2: Things are completely different now.
Speaker 3: Now they are really being asked and sometimes kind of
Speaker 3: required to do a lot more in the Middle East.
Speaker 2: It's a complete shift.
Speaker 1: Today on the show, the shifting power dynamics between Wall
Speaker 1: Street and the Middle East and what those changes mean
Speaker 1: for the region, for geopolitics and for investors. I'm David
Speaker 1: Gera and this is the big take from Bloomberg News.
Speaker 1: Heather Perlberg told me she noticed something had changed about
Speaker 1: the relationship between US asset managers and the Middle East.
Speaker 1: On a recent reporting trip to the Gulf.
Speaker 3: When I was down there, I spend time in Doha,
Speaker 3: I spend time.
Speaker 2: In Dubai and Abu Dhabi, and.
Speaker 3: Almost everyone I talked to had mentioned a kind of
Speaker 3: shift in the power dynamic. The intermediaries who are helping
Speaker 3: raise money for the biggest US investors. We're talking about it.
Speaker 3: So it feels when you're in the region, almost palpable
Speaker 3: that they are in this position of power that they
Speaker 3: they really have never been in like this quite before.
Speaker 1: Heather says that there are a few reasons for this shift.
Speaker 1: One is that increasingly the sources that US based money
Speaker 1: managers have tapped for funding are running dry.
Speaker 3: We have a situation in the US where a lot
Speaker 3: of the longtime large institutional investors like the US pension
Speaker 3: plans are kind of tapped out.
Speaker 2: They don't have much money to give.
Speaker 1: But US based asset managers like JP Morgan, Goldman, Sachs,
Speaker 1: and Lazard are not willing to just stop growing.
Speaker 3: So the only way these guys are going to keep
Speaker 3: growing is if they continue to suck in money from
Speaker 3: the biggest institutional players in the world.
Speaker 1: And Many of the biggest institutional players in the world
Speaker 1: are Middle Eastern sovereign wealth funds, which have a lot
Speaker 1: of money. Altogether, they're worth nearly four trillion dollars, which means.
Speaker 2: You have the money, you can make the rules.
Speaker 1: Rules like lower fees.
Speaker 3: So there used to be this very typical fee structure
Speaker 3: that was known as two and twenty, so the private
Speaker 3: equity firms and hedge funds would get a management fee
Speaker 3: and then they would get a percentage of profits twenty percent.
Speaker 3: That has been kind of fading over time and now
Speaker 3: essentially thrown out the window.
Speaker 2: So these funds are now saying, well, we're not we're
Speaker 2: not doing that anymore.
Speaker 3: We're going to pay you lower management fees and we're
Speaker 3: going to take more of the profits.
Speaker 1: And in some cases they're saying, the help with paying
Speaker 1: you to invest our money for us. We want in
Speaker 1: on the deal sheet alongside you. We want to be
Speaker 1: co investors.
Speaker 3: They want to be kind of flush left in this
Speaker 3: this coveted position when the deals are written up.
Speaker 2: They want their name in lights.
Speaker 3: They want to have kind of street cred for working
Speaker 3: behind the scenes on putting these deals together so they
Speaker 3: can become more relevant on Wall Street and in the
Speaker 3: broader investing world.
Speaker 1: Heather says, part of the strategy here is just to
Speaker 1: become less dependent on big US firms, which is why
Speaker 1: these sovereign wealth funds have been pushing for another thing,
Speaker 1: they've been asking US asset managers for more when it
Speaker 1: comes to training local talent. US firms had done this
Speaker 1: type of training before, but it used to be that
Speaker 1: they could dictate the terms.
Speaker 3: They would often be able to push back and say no,
Speaker 3: that's too many people, or we're only going.
Speaker 2: To do it for two weeks, not four.
Speaker 3: But now it feels like they're tolerance for it is
Speaker 3: increasing and it's happening more frequently.
Speaker 1: So these sovereign well funds are effectively pushing for people
Speaker 1: in the region to go and work with the Blackstone
Speaker 1: or go and work with another large asset manager exactly.
Speaker 3: And in some cases they're on these investing teams working
Speaker 3: on deals, so they want them to have a better
Speaker 3: understanding of how to do deals themselves so they can
Speaker 3: beco more sophisticated and lean less on the Blackstones of
Speaker 3: the world to be able to make money.
Speaker 1: So what do these shifting power dynamics mean for the future.
Speaker 1: Of the region that's next. Sovereign wealth funds in the
Speaker 1: golf have become more and more powerful than as new
Speaker 1: Bloomberg reporting reveals, they're not afraid to show it in
Speaker 1: exchange providing capital. They want to get more from US
Speaker 1: based asset managers, like more favorable terms, more partnership opportunities,
Speaker 1: and more jobs in the golf. But that transition hasn't
Speaker 1: been without bumps.
Speaker 3: There have been some issues, especially back at the start
Speaker 3: of the Israel Hamas war.
Speaker 1: After October seventh, a number of executives at big US
Speaker 1: asset managers like Larry Fink of black Rock and Mark
Speaker 1: Rowan of Apollo spoke out in support of Israel. You
Speaker 1: can hear how forcefully Rowan responded to that attack in
Speaker 1: an appearance on CNBC.
Speaker 4: This is a group, a mass that believes that the
Speaker 4: Jews should be killed. Read the charter behind every rock.
Speaker 4: You shall seek out the Jews and kill them. This
Speaker 4: is what we're talking about. This is not about a
Speaker 4: political solution or disagreements over how Israel has treated Palestinians
Speaker 4: in the West Bank and Gaza. This is a group
Speaker 4: that is a terrorist group. The inability to actually say
Speaker 4: that is morally confused and bankrupt.
Speaker 1: How did that resonate, How did that threaten to change
Speaker 1: or upset the relationships that have been established.
Speaker 3: Well, the UAE has a relationship with Israel and some
Speaker 3: of the biggest and more sophisticated investors are there. I
Speaker 3: think it gets sticky when you talk about cutters investing.
Speaker 2: Firm Qia, when you talk about Kuwait.
Speaker 3: I think after Larry Fink came out really strongly in
Speaker 3: support of Israel, there were protests.
Speaker 2: Happening in Kuwait, but he did end.
Speaker 3: Up going down there and it didn't seem to be
Speaker 3: any sort of travesty.
Speaker 2: It doesn't seem to curb these relationships.
Speaker 3: It doesn't seem to stop the money flow. It just
Speaker 3: adds nuances that need to be kind of worked through.
Speaker 1: And for the most part, these issues haven't stopped US
Speaker 1: firms from continuing their efforts to court Middle Eastern cash,
Speaker 1: nor have they prevented sovereign wealth funds from increasing their demands,
Speaker 1: from lowering fees to co investing, to asking US firms
Speaker 1: to grow their presence in the region. For instance, take
Speaker 1: Saudi Arabia.
Speaker 3: In Riad, they are really pushing for more of that.
Speaker 3: They're pushing for people to open up headquarters, and sometimes
Speaker 3: deals are contingent on that. They'll say, we'll give you
Speaker 3: money or we'll do this deal, but you have to
Speaker 3: apply for a regional license and little bit of a
Speaker 3: quid pro quo element, and it seems to be working.
Speaker 1: But Heather says, all these moves, well, they might help
Speaker 1: US firms raise cash in the short term, could pose
Speaker 1: issues down the line.
Speaker 3: People used to joke that you could go to Adia
Speaker 3: or Mubada Lah and just sit in the lobby and
Speaker 3: see a rotating cast of US funds going through on
Speaker 3: a random Tuesday. But at this point they are really
Speaker 3: narrowing their relationships, so the sovereign wealth funds are choosing
Speaker 3: fewer managers that they can give more money to.
Speaker 1: Recently, Abu Dhabi's sovereign wealth fund, Mubadla, started its own
Speaker 1: investment arm, effectively cutting out the Blackstones and the Goldmans.
Speaker 1: Do you think that we're going to see that happen
Speaker 1: at other sovereign wealth funds in the region.
Speaker 2: Yeah, Mubadala did start its own investment.
Speaker 3: Arm, and I think part of that is just having
Speaker 3: the wherewithal to do their own deals. They don't need
Speaker 3: to depend on global fund managers to find investments, to
Speaker 3: find a place to put their money, and then they
Speaker 3: don't have to pay fees. So I absolutely think you're
Speaker 3: going to see more of that. Once they figure out
Speaker 3: how to structure these deals and they have the right
Speaker 3: people internally doing it, it makes sense for them to
Speaker 3: kind of skip the middleman and just do these deals themselves.
Speaker 1: This is the Big Take from Bloomberg News. I'm David Gura.
Speaker 1: This episode was produced by David Fox. It was edited
Speaker 1: by Caitlin Kenny and at vaith Nier. It was mixed
Speaker 1: by Robert Williams. It was fact checked by Thomas lu
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Speaker 1: senior editor is Elizabeth ponso N. Cole Beemster Bor is
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Speaker 1: We'll be back tomorrow.