Saudi Arabia adds billions to sovereign wealth fund

King Salman issued a directive allocating the funds from the country’s reserves for the Public Investments Fund, 'aiming to diversify the investment portfolio and improve the revenues of investment'.

Saudi Arabia’s King Salman issued the directive allocating the funds from the country’s reserves for the Public Investments Fund. Yoan Valat / AP Photo

Saudi Arabia has doubled down on its investment diversification strategy, allocating a further 100 billion Saudi riyals (Dh97.92bn) for its sovereign wealth fund following several high-profile tech investments.

King Salman issued a directive allocating the funds from the country’s reserves for the Public Investments Fund (PIF), “aiming to diversify the investment portfolio and improve the revenues of investment”, according to a statement by the Saudi Press Agency on Wednesday.

The sovereign wealth fund will draw on the additional funds to pursue investment opportunities in both domestic and international markets, the statement said, “particularly some expected high-yields opportunities in the local market that supports the private sector investments and promote economic growth”.

The extension of extra credit to the PIF reaffirms the government’s commitment to bolstering overseas investments as a means of lessening the country’s reliance on oil revenues.

“The government is aggressively pursuing its investment diversification plan,” John Sfakianakis, the director of economic research at the Gulf Research Center, told Bloomberg.

“It also sends a powerful message that the local economy is seen as a tremendous opportunity and will boost private sector confidence after a series of government spending cuts.”

News of the government cash injection, coupled with increased investor confidence ahead of on Wednesday’s landmark oil production deal in Vienna, sent Saudi shares soaring to their highest level of the year so far.

A Riyadh-based trader, who did not want to be named, suggested that the injection would have little impact on stock markets in the Arabian Gulf, with the bulk of the PIF’s direct investments likely to be based beyond the region.

The PIF, established in 1971, is central to Saudi Arabia’s ambitious National Transformation Program, which aims to restructure the country’s economy following the sharp decline in oil revenues since 2014.

The plan envisions the transfer of ownership of oil giant Saudi Aramco to the PIF, making it an investment powerhouse with assets of more than US$2 trillion at its disposal.

The PIF already owns stakes in several Saudi blue-chip companies, including petrochemicals giant Sabic and National Commercial Bank, the country’s largest lender.

Reports last month suggested that the fund was considering offloading some of its Saudi equities portfolio to raise money for further international acquisitions.

The fund has already made its intentions clear over the past six months, with a string of high-profile investments in regional and international technology ventures.

The PIF announced itself on the international stage with a $3.5bn investment in ride-sharing app Uber in June, giving it a 5 per cent shareholding in the company, as well as a position on its board for its managing director, Yasir Al Rumayyan.

Plans for a $100bn London-based technology investment fund in conjunction with Japan’s Softbank were unveiled in October, with a view to investing in companies over a five-year period.

Last month, the PIF announced it would invest $500 million in noon.com, a high-profile $1bn e-commerce company launched by Mohamed Alabbar, Emaar Properties’ chairman.

The new venture is to launch operations in Saudi Arabia and the UAE in January, with a product line of more than 20 million items, including grocery items.

* with agencies

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