Saudi Arabia is in a race to build a post-oil future, and its sovereign wealth fund – a vehicle to lead its global ambitions under the plan known as “Vision 2030” – is spreading around the oil-rich kingdom’s largess like never before.
The Public Investment Fund, better known as the PIF, has emerged as the main force for the far-reaching diversification drive championed by Crown Prince Mohamed bin Salman, who is reshaping the country’s economy for a ‘non-oil future.’
The fund’s main purpose is to stimulate inward investment, access new technologies, develop local industries and address widespread underemployment in the kingdom.
The drive includes big bets in global sports including golf and soccer, which fits with a strategy to promote tourism, improve Saudi Arabia’s image abroad and enhance the quality of life for citizens.
The size of the fund and the scope of its spending spree – assets are nearly $800bn, according to Bloomberg – has made the PIF both a force for modernising Saudi Arabia and a tool for so-called soft power on the global stage.
Set up in 1971 as oil revenue was pouring in, the PIF provided development loans and held the state’s passive interest in publicly traded companies.
Then, in March 2015, the fund was “reborn,” according to its website, and placed under Prince Mohamed, its chairman.
One focus is tourism.
In a country that until recently was largely closed off to foreign holidaymakers, the PIF is investing in luxury resorts, cinemas and entertainment complexes to lure more tourists, and to stop Saudis from touring abroad.
It has been handed tens of billions of dollars that would normally have gone to the Finance Ministry or the central bank, along with land grants and an 8% stake in state oil giant Saudi Aramco, the world’s biggest crude exporter.
Another is sports.
The goal is to excite the younger generation and enhance Saudi Arabia’s stature on the global stage. In June 2022, PIF-backed LIV Golf agreed to merge with the PGA Tour, the US-based body that puts on the sport’s marquee events.
The PIF bought struggling English Premier League soccer club Newcastle United in 2021 and has taken over several Saudi teams, bankrolling some of the sport’s biggest stars to play in the kingdom.
It’s hard to tell how profitable the PIF’s bets have been.
It took an $11bn loss on investments in 2022 as global markets tumbled, according to Bloomberg. A $45bn commitment to SoftBank Group Corp’s technology focused Vision Fund, probably its biggest international deal, has failed to deliver big gains.
Still, some deals aided the fund’s other goals: An investment in Lucid Motors led the electric carmaker to open the country’s first auto factory.
The PIF aims to create private-sector jobs in a country where about 70% of the population is under the age of 35 and 42% of the workforce is employed by the government.
In a wider sense, policy makers in every Gulf country now know for sure the oil windfall the region has been accustomed to cannot be taken for granted in the future.
The PIF’s goal is to reach $2tn in assets by 2030, becoming the world’s biggest wealth fund. It’s now No 6, with Norway topping the list at $1.4tn.
The PIF’s flamboyant investment style defies comparisons with other sovereign wealth funds. Whether the fund’s ambitious investments plans could earn a big return is beside the point.
Saudi Arabia’s bold economic overhaul, championed by Prince Mohamed, bodes well for the kingdom’s non-oil future.