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French (Canada) - Saudi Arabian Endowment
- 2025
- Active domestic and/or GCC regional equities
- USD 80 million
- Review and identify investment managers to run separately managed account or bespoke fund of one, with an expectation of outperformance net of fees over the market cycle.
- Strategic advisory, Manager research and selection
Our specialist says:
Many local Saudi-based institutional investors know the domestic asset management landscape well and have familiarity with many of the managers in the search. This was the case here, but working with bfinance allowed the client to leverage our additional manager search team resource and gain an independent, thorough review of the manager universe with fresh and objective eyes. This provided an important audit trail for the investor’s manager selection governance, whilst allowing close collaboration and debate on known managers’ strengths and weaknesses.
- 18Longlist
- 7Second stage
- 3Shortlist
- 2Selected
Client-Specific Concerns
The Saudi Arabia based asset owner was seeking to make further allocations to Shariah-compliant local and/or regional active equities. Any investment style was in scope, with a preference for unconstrained ('freestyle') investment offerings rather than core or benchmark-relative processes. The search remit considered both GCC and Saudi specific strategies with the objective of determining which remit would present the strongest performance profile. Other requirements included a 20% off-benchmark limit, an individual stock weight limit (15% absolute or +5% relative, whichever higher), and at least 3 years of track record preferred. The managers also had to be managing a minimum of USD 250 million in Saudi/GCC equities as an asset class.
bfinance value-add:
- Maximised choice. The investor was open to consider manager proposals that were carve-outs, such as a Saudi Arabia subset of a flagship GCC strategy or a GCC carve-out from a MENA offering. This yielded a high number of manager participants and strategy variants to consider. Ultimately, the investor selected both a Saudi-specific strategy and a regional GCC strategy.
- Ensuring Shariah compliance. The investor was willing to delegate the implementation of Shariah compliance to managers, so bfinance explored managers’ credentials and experience in ensuring Shariah compliance. Where a conventional track record or portfolio was proposed, bfinance considered the impact of the investor’s own Shariah-constrained eligible universe on the managers’ ability to execute the strategy. The investor applied a strict “pure” Shariah approach, so we analysed the extent to which such constraints may affect (often already concentrated) freestyle portfolios.
- Strong search governance. The investor had several incumbent active manager allocations and pre-existing relationships and knowledge of many of the managers in this local universe. Nonetheless, bfinance was able to provide the independent, thorough assessment process, search governance and audit trail sought by the investor’s internal team to support them in this manager selection exercise.
- Team turnover analysis. Team changes and personnel moves are a characteristic of the local manager universe. We carefully considered the significance of changes to named portfolio managers, supporting research analysts, and senior oversight such as from CIOs. We sought stability of the investment decision-making function, in order to build conviction that the investment process and potential outcomes could be repeated in the future.
