Public Investment Fund of Saudi Arabia

The Public Investment Fund (PIF) (Arabic: صندوق الإستثمارات العامة‎) is the sovereign wealth fund of Saudi Arabia. It is among the largest sovereign wealth funds in the world with total estimated assets of $347 billion.[1] It was founded for the purpose of investing funds on behalf of the Government of Saudi Arabia. Saudi Arabia aims at transferring the PIF from a mere local authority to the largest sovereign fund in the world. Thus, PIF is working on managing assets worth $400 billion by 2020.[2] The PIF has a portfolio made up of approximately 200 investments, of which around 20 are listed on Tadawul, the Saudi Stock Exchange.

Public Investment Fund
Founded17 August 1971 (1971-08-17)
FounderFaisal of Saudi Arabia
Headquarters
Riyadh
,
Saudi Arabia
Key people
Mohammad bin Salman, (Chairman)
Yasir Al-Rumayyan, (Governor)
AUM$347 billion[1]
Websitewww.pif.gov.sa

Role
Yasir bin Othman Al-Rumayyan in 2016

The Public Investment Fund invests in specific projects through equity, loans or guarantees, and allocations of public funds. The PIF also provides medium and long-term loans to the large-scale government and private industrial projects. The PIF invests in the fields of telecoms, aerospace, energy, green technologies, and security, seeking a focus on housing finance, renewable energy, and information technology.[3]

History

The Saudi Arabian Public Investment Fund (PIF) was established in 1971 by Royal Decree M/24[4] to provide financing support for projects of strategic significance to the national economy.[5]

Since its inception, the PIF has been the Kingdom's main investment arm, and has played an important role in the financing of vital projects in the Kingdom, including in the oil refining, fertilizer, petrochemical and electricity sectors. In July 2014, the Council of Ministers granted the PIF authority to fund new companies inside and outside the Kingdom, either independently or in cooperation with the public and private sectors, without the council's prior approval.[6]

PIF post-CEDA

In March 2015, oversight of PIF was moved from the Ministry of Finance to the Council of Economic and Development Affairs (CEDA). CEDA was created following the fluctuations in oil prices in 2014, in order to improve efficiency in the government's decision-making apparatus. As part of this process, a new PIF was appointed, chaired by Crown Prince Mohammad bin Salman Al Saud.[7]

Following these changes, the Board is taking steps to refine its investment capabilities and enable the fund to manage a broader portfolio of current and new assets,[8] ensuring that it is aligned with the government's Vision 2030.[9] The aim is to diversify government resources and the economy and to help unlock strategic sectors.[10]

Investment projects

Beginning in 2015 the PIF began making a number of high-profile investments, including acquiring a 38% stake in South Korea's Posco Engineering & Construction Co. in July 2015[11] and establishing a sizable fund with French firms in October 2015. In June 2016, the PIF acquired an approximate 5% stake in Uber for $3.5 billion. On 14 October 2016, SoftBank Group announced it had signed a memorandum of understanding with the PIF for the establishment of a London-based SoftBank Vision Fund which aims to invest up to $45 billion over five years in the tech sector.[12]

In March 2016, it was announced that ownership of Saudi Aramco would be transferred to the PIF and that the Kingdom will seek to list 5 percent of Aramco's shares by 2017. The PIF expects to become the largest sovereign wealth fund in the world with assets of $2 trillion.[13]

On 20 May 2017, during the Saudi-US CEO Forum which was part of President Donald Trump's official trip to Saudi Arabia, the Public Investment Fund (PIF) announced plans to "invest $40 billion in infrastructure projects, mostly in the U.S." Saudi Arabia, which is "working to diversify its economy" entered into business deals with General Electric, Lockheed Martin, and The Blackstone Group. Blackstone, whose CEO and founder—Stephen A. Schwarzman—is a top supporter of Trump, entered into a non-binding memorandum by which the PIF committed $20 billion to the project.[14] During the CEO Forum US-Saudi, arms deals were announced including a pledge to "assemble 150 Lockheed Martin Black Hawk helicopters" in Saudi Arabia, representing 450 jobs in Saudi Arabia" as part of the "$6 billion deal for Black Hawks."[15]

Qiddiyah, an entertainment megaproject was established on 7 April 2017, and is currently being built, is wholly owned by PIF.[16]

On 31 July 2017, the PIF announced it will spearhead the Red Sea project for luxury beach resorts built over 50 islands unlocking 200 kilometres (125 mi) of coastline.[17] PIF will inject initial capital in order to raise funds for investments by international actors in the tourism and hospitality sectors.[18]

On 7 August 2018, Elon Musk announced that he was considering taking automotive and energy company Tesla private and that funding was "secured."[19][20] In a follow-up blog post six days later, Musk said the Saudi Arabian sovereign wealth fund had met with him several times since early 2017 to express interest in such a move "because of the important need to diversify away from oil." As of that post, the fund held almost 5% of Tesla stock, purchased through public markets.[21]

On 29 January 2019, Saudi Arabia has announced setting up a closed joint-stock company named NEOM with $500 billion.[22] The aim of this company that wholly owned by the PIF, the sovereign wealth fund, is to develop the economic zone of Neom.[23]

In March 2019, it was revealed that PIF paid a New York communications firm, Karv Communications, $120,000-a-month in order to repair the Saudis diplomatic damaged reputation after the Assassination of Jamal Khashoggi.[24]

On 27 April 2020, PIF purchased a 5.7% stake (valued at $500 million) in concert distributor Live Nation.[25]

On 16 May 2020, the Public Investment Fund, has purchased minority stakes in major U.S. companies including Boeing, Facebook and Citigroup, according to a U.S. regulatory filing.[26] PIF disclosed a $713.7 million stake in Boeing, around $522 million in Citigroup, a $522 million stake in Facebook, a $495.8 million stake in Disney and a $487.6 million stake in Bank of America. It also disclosed a small stake in Berkshire Hathaway.[27] PIF also disclosed an $827.7 million stake in oil company BP.[28]

On 18 May 2020, the SoftBank Group confirmed that during the fiscal year 2019–2020, the Vision Fund, in which Saudi Arabia invested $45 billion, incurred a loss calculated at $17.7 billion, after the value of investments was written down. The losses were related to the investments in WeWork and Uber Technologies Inc. In 39-year history of SoftBank, the Saudi Arabia-backed funds paid the group its worst ever losses, where the overall company losses were 1.36 trillion yen (more than $12.5 billion).[29]

In June 2020, PIF purchased a 2.32% stake (valued at $1.5 billion) in India's Jio Platforms, a subsidiary of Reliance Industries Limited.[30][31]

In November 2020, Saudi Arabia's PIF reduced its holdings in US stocks to $7 billion from $10.1 billion in the third quarter. It instead left a stake of $2.7 billion in Uber Technologies Inc.[32]

First Commercial Helicopter Company

In an aim to realize the Saudi Vision 2030, the PIF has established the first commercial helicopter company in Saudi Arabia. Such a step would ultimately boost the tourism sector. Moreover, it will be utilized as a transportation mean within the major Saudi cities.[33]

See also

References
  1. "Public Investment Fund (PIF) - Sovereign Wealth Fund, Saudi Arabia - SWFI". www.swfinstitute.org. Retrieved 10 January 2021.
  2. Bloomberg. "Saudi wealth fund on track to manage $400bn assets by end-2020". ArabianBusiness.com. Retrieved 31 May 2019.
  3. Official Website, PIF website
  4. "موقع هيئة الخبراء بمجلس الوزراء". Archived from the original on 26 February 2017. Retrieved 2 December 2016.
  5. Bloomberg - The Key Questions Asked About Saudi Arabia’s $2 Trillion Fund
  6. "Saudis refine blueprint for post-oil economy". 26 April 2016. Retrieved 2 December 2016.
  7. "Cabinet Session 23-3-2015 - kingdom of Saudi Arabia - Ministry of Foreign Affairs". Retrieved 2 December 2016.
  8. "Vision 2030 – How to achieve our vision". June 2016. Archived from the original on 25 September 2017. Retrieved 8 June 2016.
  9. "Financial Times - The Saudi Reshuffle: five key reforms in Riyadh, May 2016". June 2016.
  10. "Al Arabiya – full text of Vision 2030". June 2016.
  11. ""Let's establish a joint venture", following a 20-minute explanation of the miracle of Incheon Songdo". POSCO Engineering & Construction., Ltd. 4 November 2015. Retrieved 22 October 2016.
  12. "SoftBank Group Corp. to Establish SoftBank Vision Fund" (Press release). SoftBank Group. 14 October 2016. Retrieved 22 October 2016.
  13. Dobson, Paul Warner (2 October 2016). "Saudi Arabia's Vision 2030". Headline Hamster. Retrieved 22 October 2016.
  14. Manchester, Julia (20 May 2017). "Blackstone, Saudis set to invest $40 billion in primarily U.S. infrastructure". The Hill. Retrieved 20 May 2017.
  15. "Saudi-US arms deal includes plans for 150 Lockheed Martin Black Hawk helicopters". Arab News. Riyadh, Saudi Arabia. 20 May 2017. Retrieved 20 May 2017.
  16. "Qiddiya Investment Company officially established as standalone company". Arab News. 21 May 2018. Retrieved 5 May 2019.
  17. His Royal Highness the Crown Prince Announces the Launch of ‘The Red Sea’ project as an international tourist destination as part of the Kingdom’s 2030 Vision, Pif.gov.sa, 31 July 2017
  18. Rob Hodgetts, Saudi Arabia launches luxury Red Sea beach resorts plan, Cnn.com, 3 August 2017
  19. @elonmusk (7 August 2018). "Am considering taking Tesla private at $420. Funding secured" (Tweet). Retrieved 14 August 2018 – via Twitter.
  20. "Taking Tesla Private". Tesla, Inc. 7 August 2018. Retrieved 14 August 2018.
  21. "Update on Taking Tesla Private". Tesla, Inc. 13 August 2018. Retrieved 14 August 2018.
  22. "UPDATE 1-Saudi NEOM set up as joint stock company run by state fund..." Reuters. 29 January 2019. Retrieved 29 January 2019.
  23. "Saudi Arabia announces creation of Neom Company". Arab News. 29 January 2019. Retrieved 29 January 2019.
  24. Saudi Arabia fund hires PR firm in the wake of Khashoggi murder, Andrew England, March 19, 2019, Financial Times
  25. https://www.musicbusinessworldwide.com/live-nation-just-sold-5-7-of-its-company-to-a-saudi-arabian-fund-for-around-500m-it-may-soon-need-the-money
  26. "Saudi sovereign fund discloses stakes in Citi, Boeing, Facebook". Cnbc. 16 May 2020. Retrieved 17 May 2020.
  27. "Saudi Sovereign Wealth Fund Buys Stakes in Facebook, Boeing, Cisco Systems". The Wall Street Journal. 16 May 2020. Retrieved 17 May 2020.
  28. "Saudi Arabia's Public Investment Fund invests billions of dollars in Boeing, Disney and Facebook shares". The National. 16 May 2020. Retrieved 17 May 2020.
  29. "SoftBank Vision Fund Posts $17.7 Billion Loss on WeWork, Uber". Bloomberg. Retrieved 18 May 2020.
  30. "Jio-PIF deal: All you need to know about Saudi Arabia's PIF, the latest investor in Jio Platforms". Money Control. Retrieved 18 June 2020.
  31. "Reliance Industries' Jio Platforms Has Raised INR 1.16 Lakh Crore Within 9 Weeks Through These 11 Deals". NDTV Profit. Retrieved 18 June 2020.
  32. "Saudi Wealth Fund Cuts U.S. Stock Holdings, Holds On to Uber". BNN Bloomberg. Retrieved 17 November 2020.
  33. "Saudi Public Investment Fund launches Kingdom's first commercial helicopter operator". Arab News. 11 March 2019. Retrieved 12 March 2019.
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