Saudi Arabia’s sovereign wealth fund, known as PIF for short, is one of the massive investment machines in global finance. For many years, the fund, founded in 1971, was considered a discreet parking lot for the oil money of the once extremely conservative kingdom. But when the young, ambitious Crown Prince Mohammed bin Salman took power in 2015, that changed. Bin Salman wants to make Saudi Arabia’s economy independent of oil and sees the PIF as an ideal tool for this. The fund was therefore reorganized and provided with enough money. With a volume of around 720 billion dollars, it has one of the largest war chests in the world. While other sovereign wealth funds were more cautious about investing in 2023, the Saudis went on a shopping spree. The PIF was behind the three biggest deals of the year. In April it pumped $4.9 billion into gaming company Scopely, bought Standard Chartered’s aircraft leasing business and took over the steel division of Saudi industrial giant Sabic.
Now the question arises as to the reasons for this spending frenzy on the part of the Saudi sovereign wealth fund and the sometimes aggressive behavior in which it buys everything that is not quick to grow: tech companies, investments in the luxury car manufacturer Aston Martin and shares in the airport Heathrow in London. Saudi Arabia looks set to diversify its economic portfolio, with a primary focus on technology companies. They hope this will have positive effects on their own economy. At the same time, they also take advantage of other opportunities. There were good ones in Europe, especially after the end of the corona pandemic; thanks to the oil price boom of the last few years, Riyadh has a bulging coffer. For this reason, unlike other economies, the Saudis are willing to take more risk. Compared to other sovereign wealth funds, the PIF apparently has fewer inhibitions.
Nevertheless, the risk is always great and those responsible for the PIF have often made incorrect calculations in the past. The Vision Fund, which was launched in 2017 by the Saudi sovereign wealth fund together with the Japanese Softbank Group and invested in tech companies such as Uber and WeWork, posted record losses. And the year before last, the Saudi National Bank (SNB), which was largely held by the PIF, burned billions when it invested again in the ailing Credit Suisse shortly before its demise.
This is perhaps why many financial experts around the world compare the PIF to a type of ATM that all kinds of companies in need of liquidity can knock on. But that doesn’t seem to bother those in power in Riyadh. They can obviously cope with losses. Because the PIF strategy is about much more than returns. The fund is intended to revolutionize nothing less than the Saudi economy.
The fund recently made headlines again. A major scandal was brewing in Europe surrounding the bankruptcy of the Signa Group, led by René Benko, who had long been viewed as a business wonder boy. We now know the methods he used to blind investors and financial institutions for many years. The Saudi sovereign wealth fund also had a hand in the group.
When the Austrian Benko and his Signa group were already on the brink, suddenly rescue was apparently in sight. Austrian newspapers cheered at the end of last year that the Saudis would provide the failed investor with financial support. But the joy came too soon, and in the end the rich Gulf Arabs changed its mind – and dropped Benko. There is a good reason why the Saudis were mentioned as potential donors: they were already involved in Benko’s scheme. The PIF co-financed the four billion pound takeover of the British department store chain Selfridges in 2023. Benko had secretly resold part of his shareholding to the PIF because his Signa Group lacked the necessary money. He left his partner, the Thai Central Group, in the dark.
Today, the sovereign wealth fund is an important part of “Vision 2030” – the ambitious future plan with which the Saudi crown prince wants to transform his country into a modern service economy and a major tourism power. The Saudis are therefore not just investing in corporate investments. Its sovereign wealth fund also invested in the English football club Newcastle United and financed the takeover of the PGA golf tour. It’s probably also about influence and global visibility.
Above all, however, the PIF invests in Saudi Arabia itself. It makes over 70 percent of its expenses there. The fund pumps billions into the Saudi football league and finances the salaries of stars like Cristiano Ronaldo, Neymar and Karim Benzema. It also owns local banks, tech companies, investment funds for startups and even industrial and defense companies.
The huge megaprojects with which Prince bin Salman wants to catapult his country into the future – such as the new test-tube city of Neom or the large tourism resorts on the Red Sea – are also financed by the PIF. The aim of these investments is to generate growth. The Saudis also hope that the large-scale projects will one day even attract investors. But it’s not that far yet – and Riyadh has to pay more. The PIF apparently made a loss of $11 billion in 2022. The year before, however, he made a profit – albeit also because of the high oil price. Bin Salman is still dependent on the substance from which he actually wants to break away. This also applies to the PIF. The fund is mainly financed by holding shares in Saudi Aramco, the largest oil company in the world. Accordingly, the strategic direction of the fund is a matter for the boss. It is officially led by Yasir al-Rumayyan, a former Saudi banker. However, observers suspect that the important decisions are only made by the crown prince himself.
However, the PIF’s strategy is not only active abroad, it also helps to constantly positively change the crown prince’s reputation at home. The fund not only ensures that the al-Nasr football club in Riyadh can play with players like Cristiano Ronaldo and Sadio Mané. It is also often the sole financier in the startup scene and in the booming cultural sector. Anyone in Riyadh looking for the money that makes all the new, hip startups or design studios possible will almost always end up with PIF.
Can the Saudi sovereign wealth fund strategy therefore have a successful future? That’s probably the billion dollar question! Bin Salman will not let himself be dissuaded from his dream. He wants the PIF to grow to a volume of $2 trillion by 2030. He recently announced that he would transfer a further 8 percent of Aramco’s shares to the fund. It is to be expected that the Saudis will continue to invest on a large scale.
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