Black Rock the world's largest asset manager has recently announced that it will be launching a new investment platform in Saudi Arabia with an anchor investment of $5 billion coming from the Kingdom's own Sovereign wealth fund Black Rock has been a longtime champion of Investments based off environmental social and governance criteria which obviously Vibes well with the authoritarian P State the company CEO Larry Fink said in an interview that the kingdom has become an increasingly attractive destination for international Investments but that's not really true so what the [ __ ] is Black Rock actually doing in
Saudi Arabia Saudi Arabia executed 81 men on satting this is the next step forward for us to be working with all our International clients Saudi Arabia confirms that the journalist Jamal kogi is dead and what it is going to be is not just the intersection between the the world and Sal black rock is best known for creating mutual and exchange traded funds for individuals and other ins tions to invest in their biggest exchange traded funds are mostly passive indexes that make buying a broad portfolio easier for regular investors they take a small fee for managing
these index funds but because those funds are so popular even a small fee generates a lot of Revenue the trillions of dollars in assets that they manage through these investment vehicles has drawn a lot of criticism from people claiming that they secretly control the world normally with the help of some laser eyes now while they do manage trillions of dollars in assets it's not their asset assets and there are strict mandates outlining what they can and can't do with the funds they manage on behalf of the millions of investors they work for but that doesn't
mean that the company doesn't deserve a healthy amount of criticism if anything The Narrative that they secretly own all of the world's biggest companies distracts from the actual questionable stuff that they and other large investment firms do the company also has operations providing advice technology and investment infrastructure to Banks Pension funds and even entire governments which is what it is doing in Saudi Arabia Black Rock first set up an office in the Kingdom back in 2019 with the initial intention of providing Financial Services to sophisticated investors according to the company's own website the remote branch
of the Black Rock Global operation hasn't really done much until the announcement earlier this year that it would be partnering up with the public investment fund to launch an investment platform with the stated goal of making it easier for international investors to invest into Saudi Arabia as well as other countries in the Middle East in North Africa the pitch is that these markets are growing and there aren't as many investors operating in the region so there are potentially outsize returns to be made while markets in the west are overvalued big investors already know this but
there is a very good reason why they don't invest in places like the Middle East and that's because they are incredibly risky and outside of oil and constructing dumb buildings funded by oil there really isn't much to invest in a well-known American company like Black Rock could ease these concerns with big investors and act as a middleman between them and the projects actually getting their money which is really when you think about it all that their company does black rock is doing the same thing here in America at the moment by building out a new
Stock Exchange in Texas we already covered the details of that in another video but basically the more places there are for people to invest the more opportunities there are for Black Rock to be the middleman and take their fees now that's the corporate approved messaging on this project but for the more sceptical amongst us there are still a few questions Saudi Arabia actually already has a stock exchange that is open to foreign investors and because of some technicalities it's actually one of the largest stock markets in the world a new investing platform would struggle to
match the functionality of a public exchange no matter how well it's funded black rock also could have set up this new initiative in a different country that doesn't have as many laws regarding the conduct of financial activity as many human rights issues or as many concerns over National governance it's a bold decision to start a new investment platform in the region and pass over established Financial Centers like Dubai Abu ababi Doha and land on Saudi Arabia as the best base of operations for your investors so it's time to learn how money Works to find out
what this team up is really about this week's video is sponsored by skillshare I've been looking to level up my productivity and with skillshare's classes and learning paths it's been easy to learn how to use notion effectively skillshare is the largest online community for creatives with thousands of classes led by industry experts across film illustration design freelance productivity and more skillshare helps you take your career skills Hobbies passions or side hustles to the next level with a learn by doing approach and stackable lessons allowing you to learn at your own pace with Summer here it's
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first 500 people to use my link in the description will receive a one-month free trial of skillshare get started now and turn your I want to into I made it happen Saudi Arabia and other oil Rich states in the region are in a race to Rebrand themselves before their oil Revenue dries up the UAE as well as Saudi Arabia Qatar and Bahrain are all trying to establish themselves as international business hubs akin to the Singapore of the Middle East the Harvard International review dubbed this the rise of the Singapore Dubai model Singapore has made itself
very rich by being a financial center that Bridges the gap between the laws and customs of Asia with investors from around the world the Gulf States are in a race to do the same with the Middle East and Africa unfortunately there isn't the same level of investment demand in these regions yet so the countries are effectively buying business activity in the hope that eventually real business activity will CCH catch up the Saudi Arabian Stock Exchange is one of the largest in the world by total market capitalization but that's only because it lists Saudi aramco the
state-owned petroleum and natural gas company with exclusive rights to the most productive oil fields in the world this technically makes their stock market one of the largest in the world but aramco is worth more than every other company listed on the exchange combined twice over it would be like putting the rock on a middle school wrestling team yes they may have won the Championship but there was one person doing a fair bit of heavy lifting anyway saudi aramco barely meets the definition of a public company anyway because according to the company's own filing less than
2.4% of the company shares are listed at all and the Kingdom of Saudi Arabia owns the remaining 97.6% this gives the local financial sector the appearance of being a major Market when the reality is that it is a lot smaller and more restrictive than other exchanges with the same market capitalization it also brings the country back to square one because when the oil runs out Aramco won't be worth anything so this is where Black Rock comes in according to a report by Bloomberg Saudi Arabia has taken to co-investing in projects with outside Partners to try
and create enough market activity to Kickstart a self sustaining financial sector it's not just the finance industry either the same report detailed that the country wanted to build an automotive industry so it gave billions of dollars to the EV company Lucid to construct cars in Jetta the company wouldn't last without constant cash injections from the Saud government because it loses money on every car it sells but it does make it look like the kingdom has become a Cutting Edge automaker they are basically doing the same thing with Finance they are funding a well-known name to
create activity in the hope that it will create more activity but what does Black Rock get from this beyond the $5 billion investment the Saudi government granted the company to develop the investment platform the company is clearly motivated by the potential of future business with the oil Rich State even before the company set up a permanent office in the Kingdom Bloomberg reported that the CEO of Black Rock Larry Fink's private Gulf Stream travels to Riyad several times a year and that he has had several private dinners with the country's de-facto ruler Crown Prince Muhammad bin
Salman in return the CEO of sad Aramco also sits on the board of Black Rock board positions in such a large and influential company are not given out lightly and giving the position to a politically sensitive foreign National is not a small decision for any company let alone one under as much scrutiny as Black Rock the real reason that the controversial company and the controversial country have developed such a close relationship is that black rock wants to manage the almost $1 trillion in assets held by the country's Sovereign wealth fund setting up domestic operations as
an option for their existing investors is a small perk when compared to the potential of managing that much money so it's not really about helping money flow into the country so much as it is managing the money coming out of it the country and its billions of dollars in oil money could not only invest through the company they could also invest into the company black rock is a business that owns other businesses on behalf of their investors but they also have shareholders that own parts of Black Rock itself even though the company manages more than10
trillion in assets Black Rock the company is only worth $130 billion at the time of making this video because its business model is only making a small fee off the money it manages Larry thinks as CEO of black rock is to make these shareholders as much money as possible and he can do that in two ways the first way is by managing more money and making more fees which means more revenue for the company itself if think could manage even 10% of the Saudi wealth fund and charge a 5% management fee on that money he
would be bringing in hundreds of millions of dollars every year for his company the second way he can increase returns to shareholders is just to get more people to buy the stock according to the company's most recent investment disclosure the sovereign state of Kuwait is the company's third largest shareholder the only investor that owns more of black rock is the Vanguard Group which is another asset manager that operates very similarly and black rock itself through Black Rock investment funds that include Black Rock in the asset spread in what can only be described as investmentception anyway
black Rock's ambition in Saudi Arabia are clearly not righteous but they aren't exactly covert either they are just courting a massive potential client and invest now if you are invested in a Black Rock fund or even into black rock itself because of its very public ESG efforts you might be rightfully pissed off about the close relationship the company is forming with a massive oil producer which let's just say isn't famous for its humanitarian efforts now the company has already responded to these criticisms but it really comes down to a calculation they have made they are
more likely to get more money coming in from one of the best funded Sovereign wealth funds in the world than money going out from ethical investors moving their money elsewhere now I am going to be writing an article on the growing concern with these big dumb investment funds over on my totally free email newsletter compounded daily Linked In the video description just because the conspiracy theories of world domination get all the attention it doesn't mean that they aren't doing some real harm to financial markets you should also go and watch my video on why black
rock is setting up a Stock Exchange in Texas with the help of the largest hedge fund to keep on learning how money works
