Saudi Arabia transfers $40bn to back wealth fund’s spending spree
Finance minister confirms move as kingdom seeks to scoop up foreign assets at depressed prices
Saudi Arabia’s central bank has transferred $40bn to the Public Investment Fund to finance its overseas spending spree as the sovereign wealth fund seeks to take advantage of the coronavirus pandemic by hunting for assets at knockdown prices.
Mohammed al-Jadaan, finance minister, said the funds were transferred from the Saudi Arabian Monetary Authority’s foreign reserves “exceptionally” during March and April.
He told the Financial Times that the foreign currency would provide dollar liquidity to the $325bn PIF to allow it to continue investing overseas, both “tactically” and for the “long term”.
“They are obviously looking for the right time and the right market,” Mr Jadaan said in an interview. “They have finished part of their investment and they may be waiting for opportunities to come in the weeks and months to come.”
The PIF, which is chaired by Crown Prince Mohammed bin Salman, has already spent at least $8bn investing in US and European blue-chip companies, including BP, Royal Dutch Shell, Total, Boeing, Citigroup, Disney and Facebook, in the first three months of the year. It has also led an investor group that has agreed to buy Newcastle United, the English football club, for £300m.
Saudi Arabia’s central bank has transferred $40bn to the Public Investment Fund to finance its overseas spending spree as the sovereign wealth fund seeks to take advantage of the coronavirus pandemic by hunting for assets at knockdown prices.
Mohammed al-Jadaan, finance minister, said the funds were transferred from the Saudi Arabian Monetary Authority’s foreign reserves “exceptionally” during March and April.
He told the Financial Times that the foreign currency would provide dollar liquidity to the $325bn PIF to allow it to continue investing overseas, both “tactically” and for the “long term”.
“They are obviously looking for the right time and the right market,” Mr Jadaan said in an interview. “They have finished part of their investment and they may be waiting for opportunities to come in the weeks and months to come.”
The PIF, which is chaired by Crown Prince Mohammed bin Salman, has already spent at least $8bn investing in US and European blue-chip companies, including BP, Royal Dutch Shell, Total, Boeing, Citigroup, Disney and Facebook, in the first three months of the year. It has also led an investor group that has agreed to buy Newcastle United, the English football club, for £300m.
It has huge domestic commitments, including the development of three “giga-projects” and incubating new local industries.
Mr Jadaan said that despite the government’s spending cuts, the development of the giga-projects, including Neom, a $500bn futuristic city that is Prince Mohammed’s flagship scheme, would continue. “Segments of these, particularly Neom, that have been approved are on track. The only delays were caused by the lockdown,” Mr Jadaan said.
But the scale of transfers to the PIF could raise unease among Saudis at a time when they are enduring painful austerity measures.
Mr Jadaan said “people understand you cannot be expected to suspend your assets that are generating revenue”.
“We need these assets to finance your operations going forward. The returns from these assets are available to us as needed,” he said. “The rationale [is], instead of keeping reserves in fixed income and liquid assets, you invest in something that’s dropping in value and has the potential to give you a very good return while you still have significant more liquidity and reserves available.”
The PIF was transformed from a once-sleepy fund after Prince Mohammed took over as chair in 2015. It rose to international prominence after investing $3.5bn in Uber in 2016. A few months later, it agreed to become the main investor in SoftBank’s $100bn Vision Fund, committing $45bn to the biggest private fund of its kind ever created.