Saudi Arabia Ramps Up ETF Efforts to Support Vision 2030

Saudi Arabia is intensifying its efforts to attract international investors through exchange-traded funds (ETFs), aligning with its ambitious Vision 2030 objectives to diversify the economy and develop capital markets. By leveraging the growing popularity of ETFs and the kingdom's strategic initiatives, Saudi Arabia aims to foster economic growth and create jobs in non-oil sectors.

The Saudi Public Investment Fund (PIF), the kingdom's sovereign wealth fund, has emerged as a key player in this strategy, acting as a seed investor in various ETFs. PIF's involvement not only boosts the credibility of these investment vehicles but also elevates them above most fund selectors' minimum size criteria. This, in turn, makes these ETFs more attractive to international investors seeking exposure to Saudi Arabia's growing and diversifying economy.

One notable example is the launch of the SPDR JPMorgan Saudi Arabia Aggregate Bond Ucits ETF by State Street Global Advisors (SSGA) in December 2024. PIF invested $200 million as a seed investor in this ETF, which provides exposure to US dollar-denominated Saudi sovereign and quasi-sovereign bonds with an average maturity of about 10 years. This investment signals PIF's confidence in the Saudi bond market and its potential for international investors.

Another example is the launch of the Albilad CSOP MSCI Hong Kong ETF in Saudi Arabia, which raised over USD 1.3 billion shortly after its release. This ETF offers Saudi investors access to Hong Kong's top companies, bridging the gap between Asia and the Middle East. PIF's investment in this ETF, along with other seed investments in ETFs tracking Saudi equities, demonstrates the kingdom's commitment to developing its capital markets and attracting international investment.

Saudi Arabia's strategy of using ETFs to attract international investors aligns with its Vision 2030 objectives, particularly the goal of diversifying the economy away from oil and developing its capital markets. By launching ETFs that provide exposure to Saudi bonds and equities, the kingdom aims to increase foreign investment in its financial markets, stimulate economic growth, and create jobs in non-oil sectors.

The global ETF industry has experienced rapid growth, reaching $15 trillion in assets under management (AUM) as of 2024. Several key factors are driving this growth, including increased investor demand for passive investing, growing interest in thematic and smart beta strategies, and regulatory changes and innovation. Saudi Arabia can leverage these trends to attract more investors to its capital markets by launching ETFs that cater to global investor demand, encouraging foreign investment, partnering with global ETF providers, and promoting the benefits of ETFs to domestic investors.

In conclusion, Saudi Arabia's ramped-up efforts to tap ETF investors support its Vision 2030 objectives by fostering economic diversification, capital market development, and job creation in non-oil sectors. By leveraging the growing popularity of ETFs and the kingdom's strategic initiatives, Saudi Arabia can strengthen its capital markets and achieve its economic diversification goals.