Abdulsalam Mohammed Al-Murshidi is the chief executive officer of the State General Reserve Fund (SGRF), the sovereign wealth fund of Oman. In this interview, he discusses the power of networking to access private market deals; why SGRF is gradually allocating more in emerging markets such as the Asia Pacific; and why the organization's moral duty is to bring a wealth of experience, technology and capital to Oman.
Abdulsalam Al-Murshidi was named on Trusted Insight's Top 30 Sovereign Wealth Fund Investors. He graciously spoke with us on Dec. 14, 2017. The following interview has been edited and condensed.
Trusted Insight: Given your geographic location, is it a challenge to gain access in private market opportunities, say in the U.S., or does the fact that you’re an ultra-long-term investor with considerable capital help in that regard?
Abdulsalam Al-Murshidi: It's more about networking. The communication tools are available today to connect with any part of the world. And in terms of accessing private deals and direct investments, we have more than one source to do so.
First of all, we've been very active for the last decade as limited partners, LPs, in most of the private equity funds, infrastructure funds and venture capital funds in the world. As partners, we have the right to co-invest. That co-investment right gives us access to so many of the good deals that our GPs are investing in.
"We can literally manage our business from a distance, and we don't need to be there physically."
We are partners in more than 100 funds between private equity, real estate, infrastructure and venture capital funds. We have visibility through these funds because in most of them we have co-investment rights. We have access to an enormous number of deals all over the world.
The second source is the advisors. As you can imagine, legal advisors, financial advisors and consultants are some of the first to know about new projects or new promoters looking for investors. So through them, we have access.
In addition to that, we have developed our own network. For example, we have direct investments in more than 30 countries around the world. And in those investments, our partners are often the largest conglomerate, the sovereign wealth fund or one of the most successful entrepreneurs in that country. So through them, we have access to new deals.
Trusted Insight: We speak with many U.S.-based institutions, and it’s interesting to learn how they run and operate. How does your fund operate in terms of investments and approach to the markets?
Abdulsalam Al-Murshidi: In terms of managing our assets, we believe that developed jurisdiction such as that of Western Europe and the U.S. is very transparent. That includes the communication infrastructure and the legal infrastructure. We can literally manage our business from a distance, and we don't need to be there physically. The system has its own checks and balances to protect the investors, not only the major investors, but also the minority investors are protected. That's why most of our investments are in those jurisdictions. They provide a very good base for the investments.
In new territories, such as East Africa, we have experienced that if we are not there physically, then things will not go well. Therefore, we have some regional offices. We either own the office or are there through joint ventures. Right now we have offices in Vietnam, India, Uzbekistan and Tanzania, just to name a few. Through these offices, we manage our investments in that region.
Trusted Insight: We’re at an unprecedented time in the markets: monetary and regulatory policies have created ultra-low interest rates; valuations are rich, across both public and private markets. Do you recognize the markets as they are today?
Abdulsalam Al-Murshidi: I know many people in 2017 that remember 2007, but I don't see it that way. We should not underestimate the fundamental forces behind this boom. I think it can survive further overstretching if overstretching is the right term for it. I believe the fundamentals behind it are much stronger than the derivatives behind 2006-2007.
By nature, I don't believe in history repeating itself. Every event has its own market forces, political forces, psychology, including the individuals and organizational learnings of the players, which will prevent them from repeating the same mistakes. It’s mixed combination of many things.
Therefore, I don't really see that this as another 2007 happening, or that 2018 will be another 2008.
Trusted Insight: The fund has a diverse portfolio and covers a wide range of markets, but is there any particular geography or sector that you’re optimistic about in 2018?
Abdulsalam Al-Murshidi: A few years ago we were very overweight in North America and developed Western Europe. So we wanted to be evenly spread across the globe. We are gradually making a higher percentage of our new investments in emerging markets such as the Asia Pacific. For historical reasons, we have an economic interest and trading relationship with both India and East Africa. We know their culture, we can understand the opportunities coming up and the proximity are there when it comes to distance.
"We don't see any other organization in Oman having the same exposure and access that we are having. Therefore, we have this moral duty to bring international projects toward Oman."
Therefore, in 2018, we're going to continue what we've been doing in 2017 and 2016. We will continue to focus on areas such as the Asia Pacific and East Africa.
Trusted Insight: SGRF has more of a global view when it comes to investing, but one of your priorities is to continue investing locally. How has that effort evolved over time?
Abdulsalam Al-Murshidi: We're gradually moving from being 100 percent overseas investors to looking inward as well. We don't see it smart to turn our back on our nation, because through our overseas investments we have access to technology, capital, the know-how, markets and management systems. We feel it's our duty to bring that wealth of experience, technology and capital to Oman as a nation. We want to provide jobs and contribute to the GDP of Oman.
We don't see any other organization in Oman having the same exposure and access that we are having. Therefore, we have this moral duty to bring international projects toward Oman.
Trusted Insight: Sovereign wealth funds, as an institution, have the unique ability to embody their country’s values. How does the State General Reserve Fund (SGRF) accomplish that?
Abdulsalam Al-Murshidi: Well, equally as important as the financial return, is our image and reputation. Our relationships with our partners are of very high value. The behaviors of our investments in the hosted country are very important because we want to reflect the same image Oman is having when we are hosted by a third country. Therefore, we do our proper due diligence, not only on the investment itself, but also on the partner we're going to partner within that country. And we do investment due diligence on the impact on the environment if there are any environmental concerns to that. And we need to know, as well, if there is any social impact from the investments we make in the third country.
Reflecting Oman's image is very important for us.
Trusted Insight: You have a master’s degree in petroleum geology and a bachelor’s degree in geophysics. How does your academic background inform your investment approach?
Abdulsalam Al-Murshidi: That’s a very interesting question. I do have a technical background, but I have a bigger passion toward developing new businesses. After my graduation, I joined a national oil company for a few years, but after that, I just submitted my resignation in order start my own business as an entrepreneur.
I expanded in doing businesses; I ended up with 26 different activities, commercial activities, ranging from real estate to technical, industrial, IT, communications and financial services. And those activities include having ownership anywhere from 5 percent all the way to 100 percent of a company.
I spent a good 15 years of my life just developing new companies. After they reach a certain maturity, I exit and I sell them. I developed my commercial, entrepreneurship and financial skills the hard way through trial and error. I had to take a few crash courses here and there, including some legal corporate government courses. Sometimes they were very short courses consisting of three days, while other courses took a few weeks. And when it comes to reading financial statements and financial modeling, I keep developing myself.
Trusted Insight: What's the number one lesson that you've learned throughout your tenured career?
Abdulsalam Al-Murshidi: You need to have courage; otherwise you'll have a lot of things stopping you from making new businesses. Organizations will have dedicated departments to provide the required checks and balances, such as legal, risk, audit, etc. By nature, they will slow you down to protect the organization. They’re doing their job, but at the end of the day, you need to have courage. Good opportunities will not wait for you to keep studying and reviewing them forever.
Trusted Insight: Any final thoughts?
Abdulsalam Al-Murshidi: Perhaps I didn't mention that we don't invest in oil and gas for a good reason. The Omani economy is based on oil and gas and the purpose of our investment is to diversify the Omani economy. So if that sector is hit, we are not hit at the same time.
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