Saudi Arabia's sovereign wealth fund, the Public Investment Fund, has accelerated the pace of headline-grabbing global deals this year. Ranked as the 10th biggest sovereign wealth fund in the world by assets under management, it currently holds nearly $300 billion in assets with a target to grow to $400bn by 2020. As the kingdom's second annual investment forum, the Future Investment Initiative, kicked off yesterday in Riyadh, where PIF executives are speaking in panels, The National takes a closer look at the fund's ambitious plans.
WHAT IS PIF?
Saudi Arabia’s sovereign wealth fund was established in 1971, focusing on financing key projects of strategic importance to the kingdom’s economy. In 2015, it began to expand its portfolio of assets with international investments. Its strategy is to invest 50 per cent in Saudi Arabia and 50 per cent globally. PIF is a key driver of the kingdom’s economic reform plan to reduce
dependence on oil under the Vision 2030 – a blueprint to transform and modernise the country. The fund has aggressively pursued investments across the globe, spanning from the US to South Korea,
in sectors ranging from technology to health care with high-profile multibillion
dollar deals.
WHAT IS THE FUND’S AIM?
The fund is a catalyst for the government’s plans for economic diversification. It aims to develop new sectors such as manufacturing and entertainment, attract foreign direct investments, create jobs for Saudis and develop high-tech industries.
WHO OVERSEES THE FUND?
The kingdom’s Crown Prince Mohammed bin Salman, the architect of Vision 2030, is the chairman of PIF. Its managing director is Yasir Al Rumayyan, a former Saudi Fransi Capital chief executive, who assumed the role in 2015. The fund ramped up hiring for its executive team in 2018, with appointments including Abdulmajeed Alhagbani, a former HSBC head of asset management in Riyadh, as director. Another hire was Andrew Liveris, the former chairman and chief executive of Dow Chemical, as a special adviser to help boost portfolio value.
WHAT ARE THE MAIN SECTORS PIF IS INVESTING IN?
The fund is increasingly focused on tech ventures primarily, but also energy deals and infrastructure projects. PIF purchased a 5 per cent stake in US electric car maker Tesla valued at around $2bn, more than $1bn in Tesla’s up and coming rival Lucid, a 5 per cent stake worth $3.5bn in ride-hailing company Uber and earmarked $45bn in Japanese SoftBank Group’s tech-focused Vision Fund. It will make another $45bn investment in the second Vision Fund. PIF has also invested in tourism, health care, utilities and real estate projects. It expects to invest about $170bn to $180bn in the next three years, the crown prince said in an interview with Bloomberg in October.
WHAT ARE PIF’S KEY INVESTMENTS?
Among its key investments, PIF is building three strategic cities: the $500bn futuristic and industrial megacity Neom that will extend into Egypt and Jordan; the Red Sea tourism project spread over a lagoon of 50 islands; and tourism wellness project Amala. In a bid to jump-start Saudi Arabia's nascent leisure industry, PIF has struck deals for cinema theatres and theme parks. After the kingdom lifted a 35-year ban on cinemas, a unit of the fund signed a deal with AMC Cinemas from the US, the world's biggest provider of cinemas, to open up to 40 theatres over five years. PIF is also investing in an entertainment resort in Qiddiya featuring a Six Flags theme park. Currently, PIF invests more than 50 per cent in Saudi Arabia, but is expected to make more investments abroad next year to meet its target of investing 50-50 per cent at home and internationally. Some of its biggest assets at home include stakes in petrochemicals giant Sabic, National Commercial Bank, the country's biggest bank by assets, and Saudi Telecom.
HOW DOES PIF FUND ITS INVESTMENTS?
The fund raised an $11 billion international syndicated loan, its first commercial borrowing, calling it the first step in incorporating loans and debt instruments into PIF’s long-term funding strategy. The fund may also sell its 70 per cent stake in Sabic to Saudi Aramco, potentially raising $70bn. The crown prince has also said the fund will get $100bn from the proceeds of a planned 5 per cent IPO of Aramco by 2021.
WHAT ARE PIF’S GROWTH TARGETS?
The fund plans to grow its assets to $400bn by 2020 and to more than $2 trillion by 2030, from nearly $300bn. PIF also plans to make more international investments next year.
WHAT DEALS ARE EXPECTED AT THE INVESTMENT FORUM IN RIYADH THIS WEEK?
Despite some business executives and partnering organisations pulling out of the investment forum in Riyadh this week in the wake of an international outcry over the killing of Saudi journalist Jamal Khashoggi, the kingdom announced deals worth $50bn on Tuesday in sectors including energy and metals.
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