Saudi sovereign wealth fund aims to double its assets to $400bn
Aramco privatisation to help fund foreign and domestic investments
Saudi Arabia’s sovereign wealth fund plans to nearly double its assets under management to $400bn by 2020 as it boosts overseas and domestic investment to kick-start weak domestic growth.
Yasir al-Rumayyan, managing director of the Public Investment Fund, told the Financial Times that funding would come from the proceeds of the privatisation of state assets, including Saudi Aramco, the oil company, government allocations, asset returns and debt.
The PIF was for years little known outside of the Gulf. But it has been garnering increasing attention as it has morphed into Crown Prince Mohammed bin Salman’s preferred vehicle to drive his planned transformation of the oil-dependent kingdom and make high profile investments overseas.
Prince Mohammed has previously said the fund could eventually reach $2tn in assets under management.
It has already paid $3.5bn for a stake in Uber, the car hailing app, and agreed to splash out $45bn in a partnership with Japan’s SoftBank to launch a technology fund, and provide half the capital for a $40bn infrastructure fund being set up by Blackstone, the US private equity firm.
Mr Rumayyan said those transactions would make up most of the fund’s international allocation. But he added that it would seek out opportunities at home and abroad.
“We are looking at companies and ventures from real estate to infrastructure,” he said. “And we have a lot more in the pipeline . . . we have too many projects.”
The fund, which has assets of about $225bn, is targeting returns of 4-5 per cent up to 2020. Overseas investment partnerships are expected to rise from 5 per cent of assets in 2017 to 25 per cent in three years, according to the fund’s plan.
But much of its focus appears to be on projects that are linked to Prince Mohammed’s ambitious reform plan, which he launched last year with the goal of creating private sector jobs and reducing the economy’s dependency on oil.
The PIF, which for decades held stakes in listed Saudi companies, plans a dramatic domestic expansion, funding megaprojects such as new resorts on the Red Sea and an entertainment complex outside Riyadh by 2022.
The fund has also said it will launch defence industries and recycling and fuel efficiency companies, as well as provide affordable housing. It has also committed half the $1bn capital required to set up Noon, an e-commerce retailer being launched to compete with Amazon in the region.
Mr Rumayyan said the PIF would work with the private sector as the government uses the fund to create “national champions” in industry.
“We are saying we want to engage the private sector with us, we are increasing business,” he said. “These are new sectors, and we need to work with others,” he said.
In recent weeks, the PIF has ploughed money into Saudi dairy producer Almarai, as the company has been hit by an economic slowdown triggered by prolonged low oil prices and weak consumer sentiment.
Still, the renewed focus on domestic activity has not prevented a who’s who of international finance, such as Blackstone and BlackRock, descending on the PIF’s investor conference in Riyadh this week in search of fundraising opportunities.