The sovereign wealth fund everyone is talking about
Pandemic has not stopped Saudi Arabia’s Public Investment Fund from going on a shopping spree
Hurting at home, Saudi Arabia splashes money abroad
There are certain things that investors think but don’t say during a crisis, especially one triggered by a global pandemic that has claimed almost half a million lives worldwide.
One of those phrases may be: “You don’t want to waste a crisis.”
That was the message delivered by Yasir al-Rumayyan, governor of Saudi Arabia’s $325bn sovereign wealth fund, in April as more than 2,000 bankers and executives listened into a virtual conference.
He wasn’t kidding. Depending on your definition of “waste”, Rumayyan and Saudi’s Public Investment Fund spending record over the past two months speaks for itself.
What isn’t entirely clear is the strategy behind the multibillion-dollar shopping spree. That is the topic of this big read by the FT’s Andrew England and DD’s Arash Massoudi.
For years we have been told that the aim of the PIF is to diversify the Saudi economy away from oil. So how does one explain the long-term vision behind snapping up stakes in US and European oil majors during the market rout in March?
In other industries, where the PIF would argue its deals have long-term value, the logic requires optimism about our post-pandemic future. It also requires looking beyond the sloppy execution behind some of the transactions, which bankers whisper to DD privately about.
Those transactions include the PIF’s investments in Live Nation, a US-based concert promotion company, the troubled cruise operator Carnival and a majority stake in Newcastle United football club.
DD has pointed out on other occasions that the purchases resemble flimsy vanity projects for Crown Prince Mohammed bin Salman (pictured below), who is seeking support from his entertainment-starved domestic population.
Better to keep their attention on those deals, rather than PIF’s previous investments, which look worse and worse each day.
Take its $400m bet on augmented reality start-up Magic Leap, which has just laid off half its workforce. Or its 2016 bet on Uber. The car-booking app is trading below the $62.5bn valuation at which the fund invested a stake of $3.5bn.
There is also the PIF’s $45bn commitment to SoftBanks’ $100bn Vision Fund, whose performance record is so mixed that Masayoshi Son compared himself to Jesus Christ last week. And the Blackstone infrastructure fund in which the PIF has bet big had an internal rate of return of -18 per cent at the end of March.
The fact that Prince Mohammed has raised PIF’s profile from what was effectively a sovereign holding company to a global investor with deep pockets is undeniable. There are grand ambitions to increase its assets to $2tn by 2030.
But as Prince Mohammed keeps his eyes peeled for opportunities abroad, he now also has to face domestic issues, not least Riyadh’s ballooning deficit, the plunge in oil prices and the pandemic.