Saudi sovereign fund's strategy in focus

Saudi Arabia’s Public Investment Fund (PIF) has pursued eye-catching investments abroad over the past several years, part of reform plans to diversify the economy beyond oil and transform the country into a high-tech investment powerhouse.

Now, the fund risks being pulled deeper into Crown Prince Mohammed bin Salman’s domestic projects, curbing its international ambitions and tying its fortunes closer to its home market, four sources familiar with its strategy said.

The following are some of the key developments and facts about PIF:

– PIF’s assets have hit about $300 billion, doubling since 2015.

– Investments structured in six areas: Saudi equity holdings, sector development, real estate and infrastructure, mega projects, international investments and a “diversified pool” across global asset classes.

– International investments are around 15% of its assets under management compared to less than 2% in 2015.

– PIF has more than 450 employees and is targeting 700 by the end of the year.

– PIF had set a total shareholder return of 4% to 5% and says it is on track to outperform that goal.

– PIF is acting as an anchor investor in major projects such as the $500 billion NEOM economic zone. It says phase 1 of the Red Sea Project is targeted for completion in 2022. The first phase of the Qiddiya entertainment project is scheduled to open in 2022, while completion of phase 1 of NEOM is expected in 2025

– Several new companies have been launched by PIF focusing on areas such as mortgage refinancing, entertainment, e-commerce, waste management, military, private aviation and fund of funds.

– Over 900,000 houses and hotel rooms being developed by 2030 across 20 projects.

Foreign commitments made by the PIF since 2015, based on Reuters and publicly announced deals, listed in chronological order:

– PIF acquired 38 percent of POSCO, a South Korean steelmaker, in February 2015, in a deal worth $1.36 billion.

– PIF signed an agreement in July 2015 with the Russian Direct Investment Fund to jointly invest up to $10 billion, without specifying each party’s contribution or where the investments would be made. In January, the head of Russia’s sovereign wealth fund said Saudi Arabia had invested $2.5 billion in Russian projects.

– In October 2015, PIF signed an agreement with France to invest $2 billion in French private funds focused on renewable energy and small and medium industries. A French statement said PIF was also in “final negotiations” to provide $3 billion to Coface, the French credit insurer, for export financing.

– In April 2016, PIF signed an agreement with Egypt to create a $16 billion investment fund, without elaborating on each party’s contribution.

– PIF acquired a five percent stake in Uber worth $3.5 billion in June 2016. It was the fund’s first major investment and widely seen as a signal of its new tech-focused strategy. It is sitting on a paper loss on its direct investment made at $48.77 per share versus current market price of $43.2.

– PIF invested $500 million in November 2016 in Middle Eastern e-commerce venture Noon.com, founded by Dubai billionaire Mohammed Alabbar.

– PIF planned to buy a 50 percent stake in Adeptio, the Gulf-based firm which controls Kuwait Food Co (Americana), in a deal worth $2 billion, Reuters reported in November 2016. No information has been publicly disclosed about the deal.

– PIF pledged $45 billion to a technology-focused investment fund with Japan’s SoftBank Group in May 2017, creating the $100 billion SoftBank Vision Fund. This year, SoftBank’s chief executive said that a “Vision Fund 2” would be launched that could again count the PIF as an investor.

– PIF signed a memorandum of understanding with U.S. private equity firm Blackstone in May 2017, committing up to $20 billion to a $40 billion fund focused on U.S. infrastructure.

– PIF announced plans at Future Investment Initiative in October 2017 to invest $1 billion in British billionaire Richard Branson’s space company Virgin Galactic and sister companies The Spaceship Company and Virgin Orbit. Branson last year suspended his directorship in two Saudi tourism projects and halted Virgin Group’s talks on the Saudi investment.

– PIF signed a memorandum of understanding (MOU) in December 2017 with U.S.-based movie exhibition company AMC Entertainment Holdings, which had plans to set up theaters in Saudi Arabia. The value of the deal has not been made public.

– PIF invested $461 million in Magic Leap, a U.S.-based augmented reality startup, in March 2018.

– PIF signed an MOU with Endeavor, one of Hollywood’s biggest talent and event managers, in March 2018 to take a $400 million stake, but Endeavor pulled out of its deal with the kingdom in the wake of the killing of Saudi journalist Jamal Khashoggi.

– PIF announced an agreement with U.S. amusement park operator Six Flags in April last year to open a theme park in Qiddiya entertainment city in Saudi Arabia by 2022. No financial details were disclosed.

– PIF partnered with other investors in May last year to acquire a 57.8 percent stake in AccorInvest, a French hotel real estate firm, for $5.33 billion. PIF’s stake size was not disclosed.

– PIF built up an undisclosed stake of just below 5 percent in electric car maker Tesla, Reuters reported in August. The fund has not commented publicly on comments by Tesla CEO Elon Musk that the fund had expressed support for a prospective deal to take the company private.

– PIF agreed in September to invest more than $1 billion in American electric carmaker Lucid Motors.