Saudi Arabia’s Public Investment Fund (PIF) has been making waves with its flamboyant investment style and high-profile deals. In recent months, the $700 billion fund has made headlines for its investments in sectors ranging from golf to soccer. However, the PIF’s unique approach sets it apart from other sovereign wealth funds, making it difficult to determine its ultimate goals and how long it will continue to invest at such a rapid pace.
Unlike other wealth funds, such as Norway’s Government Pension Fund Global or Abu Dhabi Investment Authority, which focus on prudent overseas investments, the PIF has a mandate to diversify Saudi Arabia’s oil-dependent economy and create jobs. Led by Governor Yasir Al-Rumayyan, the fund holds stakes in domestic companies, including Saudi Telecom Company and Saudi National Bank, as well as 8% of oil giant Saudi Aramco.
While the PIF has gained a reputation for its flashy acquisitions, it actually deploys only 21% of its assets outside of Saudi Arabia, compared to the approximately 25% invested by other similar funds. The fund’s strategy is also riskier, resembling a mix of venture capital, hedge fund, and startup investments.
The PIF has had both successes and failures in its portfolio. Notably, it invested $45 billion in SoftBank’s Vision Fund, which has not yielded significant returns. However, the fund made a 25% total shareholder return in 2021 and has performed relatively well compared to other sovereign wealth funds.
The PIF’s ambitious goals of diversifying the Saudi economy and increasing its assets under management to $2 trillion present challenges. The fund’s focus on strategic sectors and giga-projects like NEOM will require major international investments, but Saudi Arabia has struggled to attract significant foreign direct investment. The PIF may need to explore options such as selling corporate holdings, borrowing, or receiving dividends from Aramco to reach its targets.
Overall, the PIF’s future success in achieving its goals remains uncertain. It has the potential to be a driving force in diversifying the Saudi economy, but it could also become a means of propping up a cash-strapped government. Regardless, it is clear that the PIF’s unique investment style sets it apart from its peers and makes it a sovereign wealth fund in name only.
According to the PIF’s annual report, its assets under management reached over 2.2 trillion riyals ($594 billion) in 2022, surpassing the previous year’s figure. Including the recent transfer of a 4% stake in Saudi Aramco, the fund’s assets now stand at around $700 billion. The fund has generated an annual shareholder return of 8% over the past five years and has made significant investments in domestic strategic sectors.
Approximately 17% of the PIF’s assets are managed externally, with the remaining 83% managed internally.
More detail via Reuters here… ( Image via Reuters )