Major restructure turns PIF into powerhouse for diversity

The Saudi Public Investment Fund (PIF) was set up almost 50 years ago as a separate arm of the Ministry of Finance, but it was completely restructured in 2015 and joined the club of top sovereign wealth funds. In less than 5 years, according to a recent ranking released by the Sovereign Wealth Funds Institute (SWFI), the PIF has moved up to 8th position among the world’s sovereign wealth funds with a net worth of about $360 billion.

The restructuring of the PIF was one of the most notable achievements in the country’s finances and investments. The change in its mandate has transformed the PIF from a local investment vehicle focusing on conservative instruments within the money market asset class into a sizable sovereign wealth fund powerhouse targeting quality, long-term, trophy and strategic investments, locally and globally.

The new PIF is becoming the main engine behind the country’s economic diversity in its move away from oil. It also develops value-added new strategic sectors through its investments and its establishment of partnerships that help to deepen the economic impact both regionally and globally.

Looking at other top sovereign funds with an average age of 30 years, you will hardly find a fund which within a short time has managed achievements to match the PIF, which has created giga-cities each the size of Belgium, taken the world’s largest oil company public, developed a major transportation network for the holy sites, created new entities in artificial intelligence and venture capital, as well as creating thousands of jobs and investment opportunities for local and international entrepreneurs.

Furthermore, under its new mandate, corporate governance, transparency and disclosure are becoming part of its new DNA. Obviously, with its global holdings of stakes in publicly listed companies, the fund made full disclosures with its investments and divestures. As coronavirus outbreaks disrupted the major international stock markets and drove stock prices to their lowest levels in years, the fund started bargain hunting to broaden its global portfolio according to its asset allocation model. The fund invested in a range of sectors including aviation, hospitality, health care, energy and telecommunications. One of the notable recent deals was the $1.5 billion investment in Jio Platforms Ltd., the telecommunications and digital services business controlled by Indian billionaire Mukesh Ambani. On the local front, it completed a $70 billion deal to sell its holding in chemicals maker SABIC to Saudi Aramco.

Sometimes, a search for timely investment opportunities may take longer than expected or may not remain viable. Since investing in the sports sector has been rewarding for many sovereign funds, early this year the fund made a bid to acquire a strategic stake in Newcastle United Football Club. Unfortunately, during the unforeseeably prolonged process, the investment rationale could not be sustained, particularly with no clarity over the next season. I am sure there are other opportunities in the sports sector that the fund will keep on its radar.

Since the start of its new mandate under the Vision 2030 roadmap, the fund has applied a modus operandi of “management by numeric objectives.” The fund has come a long way, from a local investment arm to a member of the top sovereign wealth funds club. I would like to congratulate its young leadership and management for exceeding their targets.

Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.