Bader Al-Sa’ad’s office is not what one might expect of the head of the Kuwait Investment Authority, a $200bn fund with interests from real estate in London to a major bank in China.
Tucked deep inside the Kuwaiti Ministry of Finance, Mr Al-Sa-ad’s space is large but functional.
Shabby carpets, a few simple watercolour landscapes and a plain wooden desk lend it a government-issue aesthetic that contrasts starkly with the elegant offices of, for example, his counterparts in Abu Dhabi.
The scion of one of the wealthiest Kuwaiti families, Mr Al-Sa’ad has rejuvenated the KIA sovereign wealth fund in his four-year tenure.
He has also become among the most visible and articulate defenders of such funds.
“Sovereign wealth funds are not speculative,” he says. “They are stable and disciplined. They are building long-term portfolios. They don’t take advantage of short-term mispricing. And unlike hedge funds, they don’t use leverage. They don’t short currencies the way some hedge funds do. ”
Mr Al-Sa’ad says there are great differences between sovereign wealth funds. “Even in Singapore, Government of Singapore Investment Corporation and Temasek are totally different. There is also a difference between opportunistic foreign exchange reserve management and what long-term future generation funds like KIA do. And some of the newer funds have a different investment style than the KIA.”
He is also outspoken about a backlash against sovereign wealth funds in the west. “We understand the concern about security and the acquisition of whole businesses in sensitive sectors like ports. But the security issue is different from country to country. What one country considers as a national security issue, another country welcomes as investors in that sector. It is legitimate to not allow acquisitions for security reasons but to say you have to always be passive is not a legitimate request.”
Mr Al-Sa’ad shares the puzzlement of executives at other sovereign wealth funds, such as the China Investment Corp, over calls from US Treasury officials and former Treasury officials for greater transparency in sovereign funds’ decision-making. “We are concerned about what they mean when they call for transparency. Do we have to announce every investment before we make it? ” he asks.
The 49-year-old former basketball player’s current big concern is equity volatility. “We have seen volatility in the market now for five months. It is also a worry that good names are trading below par and a real shock that there are no longer buyers for triple A rated commercial paper,” Mr Al-Sa’ad says. The recent interest rate cut was evidence of the US government’s commitment to addressing the crisis, he adds.
Although his recent focus and passion has been Asia, Mr Al-Sa’ad is cautious about the Chinese stock market. “Asset prices in the Chinese equity market are inflated because in China so much money is chasing so few opportunities. This is a situation of demand and supply,” Mr Al-Sa’ad says, as he drinks mint tea.
“The supply of public equities should be increased so as to satisfy the domestic demand for participating in the financial miracle of China. This will use up the excess liquidity from the stock market.”
At the same time, Mr. Al-Sa’ad is looking at property but in the secondary cities of China rather than in Shanghai or in Beijing. And he says he is “bullish” on Vietnam.
“The government has a will to change the economy; there is a huge jump in direct foreign investment year over year,” he says.
“They are learning from the Chinese experience and it is easier to enter Vietnam than other emerging economies …We are interested in buying a stake in a financial institution but these stakes are not cheap.”
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