The Abu Dhabi and Riyadh rivalry picks up pace as each sends out diverging signals

Good morning, wonderful people. With hope rising that the US-Iran war just might (ever-so-slowly) be drawing to a close, we expect the rivalry between Abu Dhabi and Riyadh to pick up steam. Each was out this week with a starkly different message.

As is usually the case with Abu Dhabi, the signal was subtle and, in this case, the photo really is worth 1k words: The crown prince of Abu Dhabi, the national security advisor, and the vice-president (and deputy PM) all seated at a table to hear what Abu Dhabi Inc. got up to in the first quarter of the year.

Sheikhs Khaled, Tahnoon, and Mansour sat through performance reviews earlier this week for ADIA (the world’s third-largest sovereign fund, with just about USD 1.2 tn in assets under management), Mubadala (USD 385 bn in AUM), L’Imad (which is absorbing ADQ and has USD 263 bn), and Adnoc (the oil and energy giant that is the profit engine for the whole edifice).

There are two takeaways from the meeting of what’s formally known as the Investment Affairs Council: The UAE is going to continue big investments abroad — and it is accelerating its aggressive courting of global asset managers to ADGM, which state-backed media called the “preferred destination for investors, global hedge funds, and wealth advisers.” A who’s who of other Abu Dhabi policymakers also attended the gathering.

Riyadh, meanwhile, is signaling that its inward pivot is just getting started: “Now our new strategy is to bring the world back to Saudi,” PIF boss Yassir Al-Rumayyan said in Rome after the fund’s latest high-profile FII event. PIF has for nearly a year now been shifting its focus away from global investments toward deploying more and more capital at home, cutting its earmark for international opportunities to 20% from an earlier 30%.

With a smaller population and a crisp strategy, the UAE has the flexibility to continue building influential positions in globally significant industries while simultaneously developing key sectors at home. Saudi, at an earlier phase of its drive to diversify away from oil and with much bigger housing and infrastructure needs, will continue to face pressure to allocate at home — particularly if Brent crude stays below USD 100.

It’s going to be even more interesting to see how the competition unfolds when you consider that Saudi, the UAE, and Qatar are now in the very first minutes of a long, costly race to harden logistics infrastructure, build redundant and alternative energy export routes, and shore up their defense capabilities. America’s shooting war may be coming to an end, but the cold rivalry between two of the world’s most interesting investors? That may just be getting started. –Patrick