Hassan Al-Sitri
The Future Generations Reserve Board confirmed that since the fund was established until today, there has been no significant loss in its budget, and the fund’s returns have been growing. Regarding the fund’s returns for the year 2023, they amounted to 9.6%, with financial returns estimated at sixty-four million dollars, with an increase in assets by 25%, as assets reached 768.9 million dollars. The Council stated that there is no investment that achieves 100% absolute profitability, as there is always the possibility of losses, while emphasizing the necessity of entering into safe investments with the aim of staying away from market fluctuations in accordance with the decree of the work system of the Future Generations Reserve Board. However, some negative declines may constitute an opportunity to achieve more gains and investments.
This came in his response to the Parliamentary Financial and Economic Affairs Committee regarding the annual report and audited financial statements for the Future Generations Reserve account for the fiscal year ending on December 31, 2023, which the committee recommended not adopting, in addition to not adopting the 2022 report.
The Council stated that the year 2022 in particular was a negative year for all investors, as the markets were studied and it was found that high inflation and political conditions led to an increase in interest in the United States of America, and due to the implementation of a number of strategies and plans, positive results appeared in 2023, and their implementation will continue with complete clarity and transparency in 2024.
He explained that the percentage of stocks in which the Council invests is estimated at about 22% of the investment portfolio, and that the strategies used are reviewed and reviewed according to the markets and changes every quarter, through periodic meetings held by the Future Generations Reserve Council.
He pointed out that the assets are distributed in a group of investments, with the percentage of stocks reaching 24% in 2023, and there are also alternative investments such as hedge funds, commodities, and property, which constitute about 15%, and the Multi-Asset Fund, which represents 5.4%. In addition to strategic investments such as the pharmaceutical factory and the tower, which are direct investments unlike investments that are managed through multiple portfolios, but the investment policy changes according to the fluctuations of global markets.
The Board tries to avoid using hedging management directly, but there are some investments that carry out this process in the portfolio without direct intervention. However, in the long term, opportunities that arise, such as those in 2023 and 2024, will be exploited to generate profits.
He pointed out that due to the failure of the contractor in charge of implementing the tower building, he was amicably terminated, and another contractor was contracted, and the implementation process is currently proceeding exactly according to the program, and it is expected that the building will be delivered in 2025, indicating that the land on which the tower is being built is a gift provided by His Majesty the King, in support of the account, so the council exploited the building to be part of it as a headquarters for the Generations Reserve Authority. As for the plan, there is a part of the building that will be converted into a commercial building to achieve a good return. The leasing process is currently underway, and a real estate agent has been appointed for the building. The building was built to international standards, making it desirable for foreign companies. The building is expected to attract foreign companies and be rented quickly. He pointed out that the idea of the pharmaceutical factory came with the aim of entering into a strategic investment and a new sector in the Kingdom of Bahrain, and the factory, mechanisms and devices in it are at the highest level, but the licensing process for medicines took a long time, and the basic part of the licenses was obtained, and the Council has so far been able to obtain licenses for seventeen medicines, and the factory has already begun producing medicines.
He stated that the seventeen medicines that will be produced include types of needles, which are among the most requested medicines in Bahrain’s hospitals. The aim of providing these medicines is to achieve competitive prices and reduce expenses for government hospitals. These medicines have been approved, and procedures and coordination are currently being worked on with the Arab Gulf countries to obtain the necessary approvals for the sale and export of these medicines.
The Council stated that the decline in the fair value reserve for the year 2023, which is estimated at two million dollars; Due to the re-evaluation of one of the investments, which is the pharmaceutical factory, as production was not taking place at that time, it is expected that revenues will rise in 2024 and beyond with the start of production in the factory, and this decrease is due to the lack of revenues being achieved and the presence of expenses only; Therefore, the fair value was negatively affected. The Council stated that it pays great attention to risk management and communicates with all investment funds to ensure the best results are achieved. In 2022, the fund faced a loss of 10%, and the distribution of investments was 60% in stocks and 40% in bonds, and the total loss was 22% in that year. However, there was a difference of 12% between the performance of the Kingdom Fund and the performance of other funds, which reflects the effectiveness of communication and support of the Council. It is also worth noting that the year 2022 was exceptional by all standards and caused losses in most asset classes, but it was considered an opportunity to benefit in the future.
He pointed out that the fund achieved net revenues of $64 million in 2023, with cash receipts amounting to $92 million, and the numbers for 2024 are expected to be better, with an increase of $55 million in one year.
He pointed out that there is a main principle that the more investments there are, the higher the rates of fees and payments related to portfolio management.
As for employees, the Council is proud that the team is 100% Bahraini and it works with the smallest possible number. The number of employees may be increased if necessary and according to the growth witnessed by the Council. These jobs require specialists, and the salaries paid to them are considered lower than the market.
The Council deals with about fifteen international investment banks, and there is a mechanism that stipulates not to invest more than 15% of all assets in any specific investment. The Council will also cooperate with four or five local banks in 2024.
