Currently being the world's largest oil exporter, Saudi Arabia since 2021 has started a large-scale national investment program designed to potentially increase the GDP through diversification of the economy.
Saudi Crown Prince Mohammed bin Salman's strategy to shift to a non-oil economy relies heavily on the Public Investment Fund (PIF) to steer the investment train at home and abroad to provide new resources for the country. The governance structure in the Arab kingdom is designed to ensure strategic alignment with Vision 2030 and effective oversight of the Fund's activities.
In its latest report, the PIF said its total assets are 3.47 trillion rials ($925 billion).
Khaleej Online in a report about the activities of the fund said that since the beginning of 2024, the PIF has made many deals to buy shares in foreign and domestic companies.
The new website claimed that the PIF is the fifth largest sovereign fund in the world and the second largest fund in the Arab world and spares no effort to achieve the crown prince's ambitions included in the Vision 2030 to achieve the goal of reducing dependence on the petrodollars. But in the meantime, the constant reliance on this huge financial fund is not without challenges, and analysts believe that the use of this fund may run into problems in the coming years.
Recently, Business Insider in a report shed light on the activities of the fund and the its measures to transform into an instrument to gain part of the aims of the Vision 2030, a strategy unveiled in 2016 by bin Salman to distance the country from absolute reliance on oil income.
Suggesting that the PIF is ready to transform into a substantial investment force globally, the report says that this fund in recent years heightened its investment in distinguished economic plans to realize the goal of cutting dependence on the oil.
In the first half of this year, the fund has invested a total of nearly $100 billion. The assets of this fund in the American market increased to $20.7 billion by the end of the first six months of this year, and according to the information published in mid-August, it has invested in 42 American companies.
Expanding investment activities
To survive the economic fluctuations and financial crises of single-sector investment, the fund broadened its activities to various economic areas.
Recently, Bloomberg revealed that the PIF has taken steps to buy Boeing and Airbus planes to establish an air cargo company as a new step to invest in the transportation of goods through the national airline of Saudi Arabia, which aims to make the country a global logistics hub.
This fund was initially established to invest in sectors that can boost Saudi economic growth. Initially, its activities were mainly focused on domestic investments. However, the path of the fund took a significant turn with the formulation of the Vision 2030 document by Bin Salman. Under Vision 2030, Saudi officials seek to increase public and private investment, attract foreign direct investment, and diversify the economy.
In general, the PIF is among the world's most active funds in the world trade. It has bet big on the likes of Uber, led by CEO Dara Khosrowshahi, according to Business Insider.
In the technology sector, it has injected $3.5 billion into Uber, invested $45 billion into Softbank's Vision Fund, bought 60 percent of Tesla rival Lucid, and owns a majority of shares of AR startup Magic Leap.
Furthermore, it has poured billions into LIV Golf league, acquired Newcastle United football club for $415 million, backed Blackstone's infrastructure fund with $20 billion, and invested in Carnival, the world's largest cruise ship operator.
Risks of PIF investment
Though bin Salman pushes for high economic level in next decade and for this upgrade he is specially counting on the PIF, his plan is not unchallenged and the grade of his success in realization of his dreams is shrouded in ambiguity.
Business Insider writes that "the fund has had to learn the hard reality of going big, as a number of its high-profile investments overseas have struggled financially. Earlier this month, for instance, PIF had to plug a funding gap for Lucid by pumping in an extra $1.5 billion... On the other hand, Saudi Arabia has been at the forefront of venture capital, which involves providing financing to early-stage startups in exchange for ownership rights or equity, which sometimes carries risks."
It seems that Riyadh's investments in some of the world's largest companies have caused many losses to the Saudis. In this regard, the "Bloomberg" network recently announced, quoting informed persons, that the PIF bought part of the shares of "Vista" and "Plural Sight" companies in 2021, and from this deal together with its joint investors after debt restructuring lost about $4 billion.
Also, Bloomberg reported that the PIF invested in the LIV Golf in 2022, but lost about $11 billion due to the fall of the company's shares.
Earlier in August, Bloomberg revealed that the fund injected nearly $750 million into augmented reality company Magic Leap since 2023, while the company is still searching for a sustainable business model.
One of Saudi Arabia's losses was the investment in Tesla which attracted more than $1 billion from Saudis for the first time in 2018 after the PIF negotiated with Elon Musk to privatize Tesla. But with reduced demand for EVs, Saudi Arabia suffered losses.
The involvement of the PIF with political figures also causes concerns. Donald Trump's son-in-law Jared Kushner, who launched private equity firm Affinity Partners in 2021, received $2 billion in commitment from the Saudi fund, a commitment now facing a probe by Senator Ron Wyden, chairman of the Senate Finance Committee.
In a letter released in June, Senator Wyden raised concerns that "Saudi Arabia's Public Fund and other Middle East funds are using payments to Affinity executives as a tool to influence Kushner and other powerful political figures."
This comes as two years ago, some Arab media reported that Saudi Arabia gave Kushner $2 billion to invest in the infrastructure of the Israeli regime. Since the Israeli regime has suffered an economic crisis due to repeated wars with resistance groups, it seems that Saudi Arabia has bet on a losing horse in this project as well.
In general, it can be said that the Persian Gulf sovereign
state funds are increasingly seeking joint investment rights and better
revenues in the deals and eyeing boosting their prominence as
world-class financial managers. But these activities are high-risk and
if such investments are undermined, the smaller partners along with
prviate equity firms will be exposed to losses.
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