LONDON- Barely a day goes by without an eye-catching story involving Saudi Arabia’s Public Investment Fund. In the last few months alone, the $700 billion investor and the companies it controls have undertaken a landmark deal to revolutionize the world of golf, snapped up a $3.6 billion aircraft leasing business from Standard Chartered bought a 10 percent stake in Spanish telco Telefonica and launched an audacious 300 million euro bid for the services of French soccer superstar Kylian Mbappé.
The PIF’s flamboyant investment style defies comparisons with other sovereign wealth funds. Multiple far-reaching targets make it difficult to tell whether the vehicle is achieving its goals. It’s also hard to judge how long it will keep throwing around cash on global markets.
Home bias
Sovereign wealth funds typically look like Norway’s $1.4 trillion Government Pension Fund Global or the Abu Dhabi Investment Authority (ADIA), which oversees nearly $1 trillion, according to analyst Global SWF. These juggernauts have been endowed by oil-rich governments to create national rainy-day funds that they prudently invest in overseas debt, equity and infrastructure.
The PIF is different. Founded in 1971, the fund was revamped in 2015 under the control of Saudi Crown Prince Mohammed bin Salman (MbS), with a mandate to help deliver his Vision 2030 plan to diversify the kingdom’s oil-dependent economy and create private sector jobs for its 32 million people.
PIF Governor Yasir Al-Rumayyan does not receive a predetermined flow of oil wealth from the state, but instead has been handed a portfolio of domestic and international assets. A third of the fund consists of significant stakes in domestic companies like the $51 billion Saudi Telecom Company and $53 billion Saudi National Bank It also controls 8 percent of $2.2 trillion oil giant Saudi Aramco worth about $180 billion, which Riyadh transferred in 2022 and earlier this year. A fifth of all PIF assets in 2022 were targeted at developing new industries like gaming, while another 5 percent was earmarked for giga-projects like the $500 billion NEOM, home of “The Line” — a futuristic 110-mile long “linear smart city”.
Despite its image as a serial acquirer of high-profile western trinkets, the PIF only deployed 21 percent of its assets outside the kingdom in 2022. By comparison, funds like the Qatar Investment Authority, Abu Dhabi’s Mubadala and Singapore’s Temasek invest only about a quarter of their wealth at home, according to Global SWF.
The PIF’s investment strategy is also racier than its more conservative peers. In a podcast recorded in October last year, Al-Rumayyan recounted how he, MbS and senior PIF managers lobbied Saudi King Salman bin Abdulaziz to take a $35 billion punt on depressed western stocks during the Covid-19 pandemic — overruling the objections of politicians on the fund’s board. The bet paid off as the initial outlay quickly swelled to $49 billion. But the episode reinforces the impression that the PIF is a mix of venture capital, hedge fund and startup money.
Blurred lines
The PIF already has some high-profile goofs under its belt. The most spectacular was probably handing $45 billion to SoftBank Group boss Masayoshi Son for his $100 billion first Vision Fund. As of March the Japanese investor’s splurge on high-profile tech bets, including office-sharing flop WeWork, had generated a meagre 3 percent internal rate of return for limited partners like the PIF since inception, even though a chunk of the cash was in coupon-paying preferred shares. Saudi National Bank lost a packet on Credit Suisse when UBS rescued the Swiss lender earlier this year.
