PRIVILEGE AND RESPONSIBILITY

Saudi Arabia 2018-19 | FINANCE | INTERVIEW

Saudi's leading pension provider is developing a stronger risk management function to better take advantage of new investment opportunities.

Mohammed bin Talal Al-Nahas
BIOGRAPHY
Mohammed bin Talal Al-Nahas is the Governor of the Public Pension Authority (PPA). He has also served as General Manager for Branches at Al-lnma Bank and Regional Manager of Central Region Branches at SAMBA Financial Group. He also serves as Member of Board of Directors of the International Company for Water and Power Projects (ACWA Power). He has been Non-Executive Non-Independent Director at Saudi Telecom Company since February 2, 2017. He has been Director of Saudi Basic Industries Corporation since September 26, 2016. He holds bachelor of science accounting degree from the King Saud University and Executive Program Certificate from the University of Michigan Business School, Michigan, US.

How will PPA participate in the country's sweeping changes?

PPA participates by aligning itself with different strategic objectives, targets, outcome-oriented initiatives, and commitments achievable through public-private partnership (PPP) efforts currently underway. It will take advantage of its access to deals and priority privileges to participate in different investment opportunities arising from the privatization efforts of previously government-owned assets and services. To further enhance our ability and readiness to take advantage of new opportunities, PPA has also invested in strengthening its internal institutional and human capabilities, as well as studying new best international models and practices for pension fund investments.

How have recent economic and budgetary changes affected PPA's returns, and how has it changed its management to reflect on this new era?

Undoubtedly, the recent economic environment has impacted the performance of our pension portfolio. However, PPA's investments are well diversified across asset classes globally, thereby offsetting, to some extent, the impact of underperformance of our local market on the overall portfolio. This strategy will continue to explore new investment opportunities coupled with developing a stronger risk management function.

Saudi Arabia has made extensive commitments to green energy. How might PPA participate in this aspect?

PPA has already demonstrated its support of initiative in this sector through investment in ACWA Power, a unit of ACWA Holding Company, and we will remain open to investment opportunities that emerge in the renewable energy space.

There is a shift in the country from the public sector providing much of the capital for major projects to the private sector playing a leading role. How will this change the PPA's investment strategy?

Vision 2030 strongly promotes private sector involvement in both old and new sectors and provides myriad opportunities in social and community-related projects—such as housing, health clubs, and public facilities—and the education, healthcare, municipal services, tourism, energy, environmental, industrial and manufacturing, oil and gas, technology, and transportation sectors. PPA will continue to view and evaluate investment opportunities both from a micro and macro perspective by taking advantage of local and international investment opportunities, identified through our research, that fall within the constructs of PPA's strategic investment objectives.

There are reports that the King Abdullah Financial District may be sold to the Public Investment Fund (PIF) in the medium term. What is the future of that project, and does real estate remain a sector of focus for PPA?

King Abdullah Financial District is still under negotiation, hence, we cannot really elaborate upon that. However, we have other real estate projects, such as the 7,345-unit development in Jeddah and Digital City in Riyadh. Real estate is an important part of an efficient investment portfolio, which is why we will continue to allocate toward it as long as valuations are attractive.

Although pension funds have performed well locally, they are still an emerging industry as a percentage of GDP when compared to countries such as the UK. What changes are key to spurring growth in the sector?

Growth in the sector is mainly a function of the size of the participants within each pension scheme, changes in demographic profiles of the contributors and pensioners, and the scheme structure. It also depends on the ability of the scheme to adapt to various local ambitious development plans and global geo-economic developments, and manage its investment portfolio suitably.

What are you plans and expectations for the year ahead, as well as your most immediate priorities for that timeframe?

Our immediate priority is to implement our goal of creating a new asset management company that will run leaner and be more focused on becoming a trusted leader in investments, and to deliver the services needed by our contributors and pensioners though various channels.