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Last month, the head of Saudi Arabia’s sovereign wealth fund rang the gong on the Hong Kong stock market. In doing so, Yasir al-Rumayyan not only celebrated the opening of his exchange that day, but also demonstrated the kingdom’s ambitions in Asia. In 2022 he will open an office in Hong Kong and the public investment fund will move to mainland China and India “hopefully soon”, he declared.
This is music to the ears of Hong Kong authorities, who have recently grown accustomed to foreign investors leaving amid rising tensions between China and the West. It also capped off his year of aggressive and contrarian investing with his PIF. PIF’s enormous investment appetite has reshaped the world of sovereign wealth funds within a few years.
The fund, which is chaired by Crown Prince Mohammed bin Salman, disbursed $31.6 billion in 2023, the most of any fund, according to data compiled by GlobalSWF. Saudi Arabia’s fund dethroned Singapore’s GIC, which had topped the ranking for five consecutive years.
PIF increased spending by a third while everyone else cut back. Overall investment by sovereign wealth funds fell by a fifth to $124.7 billion, opting for caution in a difficult macroeconomic environment. GIC has cut spending in half despite having more than $140 billion in “dry powder” (cash not yet invested).
PIF also stands out for the size of its investments, with three of its 49 investments last year being the largest in the industry. In April, the company spent $4.9 billion on US gaming company Scopely, acquired Standard Chartered’s aircraft leasing business for $3.6 billion, and acquired the steel division of Saudi chemicals group Saavik for $3.3 billion. . Other investments include 8% in Nintendo, 10% in Heathrow Airport and 49% in British hotel chain Rocco Forte.
The deal comes as a result of Prince Mohammed’s recent overhaul of the 53-year fund. In 2015, he decided that the PIF would drive modernization and diversification of the Saudi economy, with the aim of preparing for peak oil and meeting the needs of a young and rebellious population of 36 million.
The foundation’s staff numbers have ballooned from 40 to 2,500 in just a few years, with a presence in nearly every country’s economic domain, engineering national integration from construction to sports and creating new national champions. I am.
“They’re everywhere and they’re becoming more specialized,” said Ludovic Farippo, a professor at Oxford University’s Said Business School, noting the “hugeness” of their ambitions.
Other funds in the region are also active, with Abu Dhabi’s ADIA, Mubadala, ADQ and Qatar Investment Authority ranking among the top 10 by spend last year. But PIF’s mission sets the fund apart.
Risk appetite is higher. “While its peers typically invest through third-party fund managers, PIF prefers to invest directly in strategically important sectors of the Saudi economy, such as football clubs, tourism and gaming. ”. . We will contribute to construction and heavy industry,” said Diego López, Head of Global SWF.
Also, I’m in a hurry. The fund aims to increase assets under management from about $700 billion to more than $1 trillion by the end of 2025 and more than $2 trillion by 2030.
This model can result in large losses. But the company’s main measure of success is not its revenue (it said it had achieved 8% annual growth by the end of 2022), but its scale and domestic impact.
A person close to the fund describes it as a “hybrid between a development fund and a private capital fund.”
PIF aims to have three-quarters of its assets in Saudi Arabia, including five of Prince Mohammed’s “megaprojects,” including Neom, a development in the Tabuk desert 30 times the size of New York. ”, but there is still plenty of cash left that can be used for overseas transactions. The official said China will likely attract more attention to secure supplies such as solar panels and mining resources.
Increased activity may lead to greater scrutiny and, in some cases, hostility.
Western public opinion and some politicians are wary of dictatorial regimes seizing assets around the world.
In December, the Spanish government announced that it would acquire up to 10% of Telefonica’s shares, in response to a move by STC, a subsidiary of PIF, to acquire a similar size stake. In June, news of negotiations between the PGA Tour and PIF over a golf partnership sparked a negative reaction in Washington, prompting an antitrust and national security investigation.
While this may cause some headaches, Lopez says Prince Mohammed’s priority is to “put the kingdom on the map.”
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