What Is SAMA Foreign Holdings?
SAMA Foreign Holdings is a sovereign wealth fund (SWF) controlled by the Saudi Arabian Monetary Agency (SAMA), which is a part of the Central Bank of Saudi Arabia. The functions of the SAMA include issuing national currency, the Saudi Riyal, supervising commercial banks, managing foreign exchange reserves, promoting price and exchange rate stability, and safeguarding the growth and soundness of the Saudi financial system.
How Does SAMA Foreign Holdings Work?
The SAMA Foreign Holdings fund is comprised primarily of wealth from Saudi Arabia’s oil-related companies, though a portion of its value comes from managing certain Saudi public pensions. The foreign holdings of the SAMA form one of the largest pools of savings of any country in the world. According to the Sovereign Wealth Fund Institute, SAMA Foreign Holdings is the world’s fifth-largest SWF, with a net worth of $494 billion in assets under management (AUM) as of June 2018.
SAMA Foreign Holdings — Background
As the largest crude oil exporter in the world, the Kingdom of Saudi Arabia is the only oil producer with significant spare capacity. These reserves have been managed effectively and prudently by the SAMA Foreign Holdings fund since its inception in 1952, and they have flourished under the fund’s recent governorship. Portions of the fund are invested internally to support the general budget, while surpluses are invested externally in semi-guaranteed government bonds. The SAMA is a cautious investor and most of its portfolio is thought to be held in low-yielding, low-risk fixed-income investments, such as sovereign debt instruments and United States bonds; although some foreign holdings are allocated to stocks in order to enhance returns.
SAMA Foreign Holdings — Strategy
As with other SWFs, the SAMA Foreign Holdings fund is relatively secretive about its specific holdings and internal operations. However, we know that a large part of its strategy is to maintain a culture that is distinguished by a high degree of market savvy, global awareness, and technical expertise. As such, and in order to protect its resources, SAMA created a risk and compliance department with the following directives:
- Mitigate risks that could affect SAMA's ability to achieve its objectives via a comprehensive systematic risk-management methodology that is compatible with international best practices and standards
- Raise SAMA's cultural profile by instilling regulations, instructions, and codes of conduct to enhance SAMA's reputation and credibility, and to create an ideal work environment that promotes clarity and transparency
- Achieve SAMA’s strategic and operational objectives by responding to all types of risks and incidents, while safeguarding the continuity of SAMA's critical activities
- Communicate effectively among SAMA's various levels of management in order to make the right decisions, and to manage risks, incidents, and crises in a timely manner
SAMA Foreign Holdings — Long-Term Vision
As its enormous SWF assets demonstrate, it is no secret that Saudi Arabia’s economy is flourishing, that it remains attractive to foreign capital, and that it enjoys continued investor confidence. As such, SAMA's management is committed to building upon what has worked: The SAMA Foreign Holdings fund will continue to invest in low-risk assets going forward, and it continues to envision significant high-growth returns over the long-term.