Investors at Saudi forum see near-term opportunities, but also urge caution

Future Investment Initiative conference in Riyadh

Participants watch the opening ceremony of the Future Investment Initiative (FII) conference on a digital screen in the lobby of the Exhibition and Conference Center at the Ritz Carlton Hotel, in Riyadh, Saudi Arabia, October 25, 2022. REUTERS/Ahmed Yosri/File Photo Acquire Licensing Rights

Oct 24 (Reuters) – Leading financiers are bracing for more short-term headwinds fueled by higher interest rates and geopolitical instability, but agree there are still places to make money in the coming months, a flagship event aimed at deal brokering heard on Tuesday.

“The year ahead will certainly present incredible opportunities,” Harvey Schwartz, chief executive officer of private equity firm The Carlyle Group (CG.O), said at the Future Investment Initiative (FII) conference in Saudi Arabia.

Private fund stakes on the secondary market, some of which are being sold at discounts of 30% as original investors need to move them off their balance sheets, is one attractive area, said Jenny Johnson, president and chief executive at mutual fund giant Franklin Templeton (BEN.N).

Similarly, mortgage pools being sold by regional banks could also be lucrative, she added.

There may also be opportunities in emerging markets including in India, Vietnam and Indonesia and in sectors like healthcare, energy and renewables, the speakers said.

Longer term, they agreed that Artificial Intelligence (AI) will present opportunities. “AI will disrupt,” said Ken Moelis, founder and chief executive of investment bank Moelis & Co. “like most technology improvements, it will benefit most people’s lives tremendously.”

But executives also warned that this is a time to be watchful and prudent, as geopolitical instability, most prominently an escalation between Islamist group Hamas and Israel, is creating fresh fault lines in the investment world.

Pricing geopolitical risk is extremely difficult, but “you have to incorporate that into your assessment,” Carlyle’s Schwartz said.

“We have a very long term view,” said Hani Enaya, chief investment officer at Saudi Arabia’s Public Investment Fund’s Sanabil Investments subsidiary. “However, we are very careful how we allocate in the near term after turbulence.”

Still, being “cautious doesn’t mean you don’t do anything,” Carlyle’s Schwartz said. “Cautious just means you’re quite thoughtful about how you are deploying that marginal bit of capital, but I think you’ll see really good opportunities.”

Reporting by Svea Herbst-Bayliss; Editing by Mike Harrison

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