00:00The direction of capital flows in the region is changing, and the U.S.-Iran war has made the shift even
00:07more visible.
00:08For decades, the Gulf's relationship with Wall Street was largely defined by capital flowing out,
00:13deployed everywhere from New York to London and Silicon Valley.
00:17That has continued, but now the Gulf is also becoming an increasingly important target for global investment.
00:24So to discuss this, we're now joined by BlackRock Investment Institute Chief Middle East and AIPAC Investment Strategist Ben Powell.
00:32Ben, good morning. Good to have you with us on this morning.
00:36Let's talk about private capital and the way the past seven months have changed the prospects of that in the
00:43region.
00:44Can you just walk us through what has changed, if anything?
00:50Good morning, Abir.
00:51So I think much has changed, but much has stayed the same.
00:55So importantly, what has stayed the same, as all of us who live here in the region are well aware,
01:00is the abundant regulatory sort of context, very supportive regulatory context, abundant energy, abundant human capital and so forth.
01:11So that's still very much true, I think.
01:14What has obviously changed, though, is the geopolitical context.
01:18And what I think we at BlackRock are saying is, at the margin, we're going to see more capital coming
01:24here.
01:25It's going to be a two-way street, as you rightly said in your introduction.
01:28For sure, capital is still going to flow from the region into the world.
01:32That's still going to continue, and that's important.
01:34But we also think we're going to see global investors increasingly running the slide rule over the GCC, looking for
01:42investment opportunities here.
01:44And we think the breadth, scale and opportunity sets here in the Middle East is increasing.
01:49So there's kind of a nice combination, I guess, of investors looking and investments becoming more and more apparent.
01:57So, Ben, on the back of what you were just saying, would you therefore say that the geopolitics in the
02:04region that are still continuing into today,
02:07would you say that they have created a bigger opportunity premium rather than a risk premium at this point?
02:16I think this is a point I'd make all over the world, but it's true here in the GCC as
02:20well.
02:21I think we're all learning to be more self-reliant.
02:23We're all having to think of our own economic and social futures.
02:28And capital markets can just play a very central role in that looking forward.
02:32So, again, I think that's true kind of everywhere.
02:35Capitalism is great.
02:36But it feels like there is an opportunity here in the GCC specifically on kind of both sides of the
02:43trade, if you like.
02:44One, funding pensions, all of that kind of stuff.
02:47But two, if we have deeper, broader capital markets here, also allowing global and, of course, local investors a bigger
02:55opportunity set to earn a fair return while supporting those societal goals.
02:59So, I think that's kind of the new emphasis, clearly from authorities, is on moving society and the economy forward.
03:07That's completely natural and appropriate.
03:09Our job at BlackRock, the world's largest investor by far, of course, is to support that whilst politely inquiring about
03:16that fair return aspect as well, I guess.
03:20Okay, Ben, what about investors?
03:21What are they asking for now that they weren't necessarily asking for six, seven months ago?
03:29So, I think there's a real whole portfolio mindset here.
03:34So, I think we are evolving from really focusing on, you know, being an equity investor, being a fixed income
03:40investor or what have you to really thinking, you know, what do I want in the portfolio?
03:45Artificial intelligence inevitably immediately comes to mind.
03:48So, let's think about artificial intelligence.
03:50That isn't solely an equity story.
03:53It is equities, it's private assets, it's infrastructure, it's the related kind of power, even, sadly, maybe defense architecture that's
04:01necessary.
04:02So, what I think we're seeing as we think about these trillions with a T, by the way, trillions of
04:07strategic CapEx dollars that are going to be either remaining here in the region or flowing from external investors, from
04:14global investors.
04:15We think people are coming to this very much with a kind of an economic opportunity mindset and only then
04:21getting into the specific asset class label.
04:23And we think that opportunity here in the GCC is only growing both in terms of the breadth of opportunity.
04:30It isn't just energy anymore.
04:32It's many, many different areas of the economy and market and the depth, the scale, the billions that can be
04:39invested.
04:40We think both of those are happening at real time.
04:42And clearly, that's very exciting.
04:46Ben, what about private credit?
04:48We're gearing up for conference season and last year's FII was dominated by private credit.
04:54Of course, this is before the whirlwind that we're seeing having started this year.
05:00Do you think that it's starting to gain traction in this region or starting to become a capital story?
05:06Yeah, I do.
05:08We do.
05:08So, there's a long way to go.
05:09I think it's fair to say we're more at the beginning than at the end of that story.
05:13But increasingly, we are seeing private credit play an important role, funding many things.
05:19Data centers come to mind, but there's a whole world out there.
05:22I think just briefly on the whirlwind, you mentioned there, this is very important.
05:27When we have a much higher cost of capital, as we are all learning to navigate through in the world,
05:34what that leads to is more dispersion, a wider range of performance.
05:37That's true in equities, but it's also true in kind of the private credit space, where we've seen a pretty
05:44tough examination, I guess, of processes and so forth over the last six to 12 months.
05:50So, we're going to continue to see private credit grow.
05:52I know I think that's true, but just we should all be a bit careful and be thoughtful around exactly
05:59what opportunities we want to be allocating capital towards,
06:02because clearly, they're not all the same.
06:04And I think the whirlwind, as you put it, Abir, has been a reminder of that.
06:08Private credit, super exciting for sure.
06:11Only going to pay, I think, over time, a bigger role here.
06:14But let's all be a little bit careful and thoughtful about exactly, precisely where we're putting our capital at risk.
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