Performance Review

Financial Investments

BECOMING A GLOBAL OUTPERFORMER

Public Equities and Liquid Assets

SEDCO Holding invests in global Shariah-compliant public equities, money markets and other liquid assets through its asset-management arm, SEDCO Capital. SEDCO Holding’s Corporate Investment Department is responsible for setting the general tone and investment strategy.

466%

In regional public equity, SEDCO Capital assets under management rose by 466% in 2018. Discretionary portfolios grew by 1,478%.

Most major asset classes posted negative results in 2018 as markets changed from a low-volatility, mid-cycle environment to a late-cycle, high-volatility environment. Market sentiment was driven by persistent concerns over global trade, slowing economic growth, and tighter monetary policy from central banks.

The international liquid assets team continued the optimization of SEDCO’s core/ satellite strategy for international liquid assets. Regionally, large funds demonstrated robust performance and assets under management increased.

International equities

Portfolio optimization saw two regional active funds discontinued and a new global defensive strategy launched. Most active managers managed to outperform their benchmarks, even in a volatile market, boosting overall portfolio results.

Islamic indices once again outperformed their conventional peers, with Dow Jones Islamic indices leading. SEDCO Capital’s passive funds, which track the Dow Jones, benefited from this outperformance.

An actively managed equity fund also managed to generate positive absolute returns for 2018, despite bourses and indices trending downwards in the year’s last quarter.

Regional equities

SEDCO Capital’s MENA Liquid Assets team continued managing SEDCO Capital’s liquid investments in MENA markets. The team’s largest fund, the SEDCO Capital GCC Equity fund, closed the year as number three in terms of equity performance amongst its peers.

Funds managed by the regional liquid asset team grew by 116% in 2018, while capital being managed in discretionary portfolios grew by 1,478%.

International
Private Equities

SEDCO Holding has direct equity stakes in operating companies and real estate assets in Saudi Arabia. Its international private equity portfolio is managed by whollyowned subsidiary, SEDCO Capital.

Direct operating companies

In 2018, SEDCO Holding revaluated its operating company portfolio with a view to optimization, cost rationalization and consolidation. A central treasury function lowered costs of borrowing and reduced group leverage.

The Group’s new Focus 2025 strategy sought to increase long-term performance by aligning operating businesses into key verticals, supporting Saudi Vision 2030.

Fund performance

SEDCO Holding’s international private equity investments are managed through its SEDCO Capital asset-management arm. In 2018 the private equity team committed an additional amount of investor capital to new funds in Europe, North America and Asia. Meanwhile, existing funds made annual distributions at a realized multiple of over 2.3x, with an IRR of 18%. 2018 also saw the private equity team commit more capital to funds than in any previous year.

Co-investments

The co-investments team executed 6 transactions globally in 2018, providing growth capital to fast-growing companies in consumer, healthcare, industrial and tech-enabled businesses.

Income Generating Private Investments

SEDCO Capital has continued building on the newly defined asset class of Income Generating Private Investments or IGPIs. This new asset class delivers regular income streams to complement existing alternative investments.

IGPIs offer a hedge against inflation and interest rate fluctuations. They improve portfolio diversification and offer strong downside protection in the face of market fluctuations.