Top Executive Wants Saudis to Invest in Domestic Market

Arab News

July 13, 2005.

The top executive of a Saudi agricultural firm, who lost heavily through overseas investments recently, is encouraging Saudi investors to channel their funds in the domestic market for safe returns.

Turki Faisal Al-Rasheed, Chairman, Golden Grass, Inc, which produces wheat, barley, peanuts and other crops, said he had incurred a 38 percent loss on his investment following the advice of a consultant working for a London-based bank.

During the same period, the returns on his investment in Saudi mutual funds average 50% in the post 9/11 period.

Al Rasheed said he found it necessary to warn Saudi investors against falling into what he described as “the trap laid by international investment firms” which are targeting 78,000 Saudi millionaires with lucrative offers.

According to Al-Rasheed, one of the factors on which overseas financial institutions have capitalized is the Saudi tendency to keep things under wraps when they incur a loss. He said they regard the loss of money as the loss of face.

“This suits banking institutions as they can go about making glib promises to the targeted audience without facing awkward questions.

Narrating his own case, he said when he was first approached by the representative of the London-based bank, he had been promised attractive returns on his investment. He was also told that the money be invested in a low-risk fund. However, it turned out to be a moderate-risk fund. “After a great deal of time and effort, I was able to escape from their clutches after losing 38 percent on the invested amount.”

When he took up the matter with the multinational firm, the received their response which read in part: “Your account has always operated on an advisory basis. This means any decisions regarding investments or any other aspect of your account are entirely your responsibility. As such, monitoring of your account is limited as we rely on your specific instructions before we can take any action.”

The Golden Grass chairman said his account with the London-based international bank was classified as moderate. “However, it did not have any minor growth of the principal; instead, it ended up after four years with losses of 38 percent of the principal fund.”

Al-Rasheed said it is difficult to understand why one should pay for the advisory services rendered by financial consultants if the account holders are eventually held accountable for the loss they incur. By contrast, the bank claims the credit if the mutual fund is performing well.

Asked how the financial market was doing in the Gulf States, he said it was safe to invest there, even though the returns were not as high as in the Kingdom.

According to Habib F. Faris, Vice president, Clariden Bank, London, no investment is safe from all the financial perils that exist. Every investment is subject to one or more kinds of risk, there is now way around this “law.”