(Bloomberg) -- Mizuho Financial Group Inc. has formed a partnership with Saudi Arabian sovereign wealth fund Public Investment Fund, and plans to launch an exchange-traded fund that invests in the Middle Eastern nation’s stocks.
The ETF will be index-linked and will mainly target institutional investors, according to documents seen by Bloomberg and confirmed by Mizuho spokesman Naohiro Takahashi. The aim is to establish the fund during the current fiscal year ending March 2025, and the possibility of listing it on the Tokyo Stock Exchange in the future will also be considered.
Mizuho Bank Ltd., Mizuho Securities Co. and Asset Management One Co. will also take part in the alliance, and Mizuho Bank and PIF will contribute initial funds for the ETF as anchor investors. PIF manages $930 billion in assets, making it one of the world’s biggest sovereign wealth funds. In Japan, it’s a major investor in Nintendo Co. and the SoftBank Vision Fund.
By launching a Saudi ETF, the alliance aims to offer higher returns to Japanese investors, who still face deposit rates near zero even after the central bank moved to raise interest rates this year. The Bank of Japan’s policy rate is 0.25%, compared with the Saudi Central Bank’s 5.5%. Saudi Arabia’s riyal is pegged to the US dollar.
Saudi Crown Prince Mohammed bin Salman is pushing to diversify the economy and reduce its reliance on oil, and the country is making big investments in everything from chip-making to Red Sea resorts and sports. But investors in Saud Arabia also face geopolitical risks in the region, as seen in outbreak of a war between Israel and the Palestinian group Hamas, which Iran supports.
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