Saudi Arabia’s PIF is focused on the home advantage

August 20, 2024, 1:55 PM

PIF is investing in growing sectors in the Saudi economy with IT making up 9.4% of its domestic investments and creating jobs for Saudis and expatriates

Value of domestic assets doubled
Saudi sector development up to 33%
Focus on ‘high-impact projects’

The value of Saudi Arabia’s sovereign wealth fund’s domestic assets under management have doubled year on year in further evidence of a strategy to focus investments in the kingdom.

The AuM, referred to in the fund’s annual report as “Saudi sector development (SSD)” increased from 21 percent to 33 percent last year.

The investments are focused on “establishing and promoting the growth of high-priority sectors in the Saudi economy”, the report stated.

Their value, which includes investments in more than 100 companies, increased by 101 percent to SAR943 billion ($251 billion) from SAR470 billion in 2022, PIF figures show.

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“As a long-term investor and catalyst of change, PIF continues to invest in high-impact projects, companies and partners that are diversifying the Saudi economy, creating new opportunities for investment and shaping the global industries of the future,” said Yasir bin Othman Al-Rumayyan, governor of PIF.

International investments comprise 20 percent of the total AuM, with local investments – which includes SSD, equity holdings, real estate and infrastructure developments, giga-projects and treasury holdings – making up the remainder.

“For years, PIF has been a key driver of Saudi Arabia’s economy, directing investments into crucial sectors,” said Vijay Valecha, chief investment officer at Century Financial.

“These investments have not only delivered financial returns but have also played a vital role in developing local talent, creating jobs for both Saudis and expatriates and boosting economic activity across important sectors.”

The PIF launched 23 companies by the end of last year and has created in excess of 730,000 jobs in the Saudi economy since 2018.

The sixth-largest sovereign wealth fund in the world, considered a key vehicle in Saudi Arabia’s Vision 2030 programme to move the kingdom away from a dependence on oil, has invested in a diverse range of sectors. They range from finance, healthcare, sport, defence and leisure to automotive, renewables and entertainment.

In terms of international investment, PIF’s total value of AuM reached SAR586 billion as of year-end 2023, an increase of 14.3 percent compared to the previous year.

“Investments made by PIF go through a process of multiple committees and are focused on its key sectors, in accordance with the fund’s mandate and strategy,” PIF said in a statement to the Financial Times.

The fund increased attention closer to home as Saudi Arabia struggles to meet ambitious foreign direct investment goals – the target is for inflows to reach 6 percent of GDP in 2030.

Inflows in 2023 slipped to $12 billion, or only 1 percent of GDP, after a surge in 2021-22.

Non-oil exports are not hitting the Vision 2030 marks either, with limited improvement seen to date, leaving Saudi Arabia exposed to oil market fluctuations.

“As the kingdom's economic potential grows and the Vision 2030 goals and mega-projects come into focus, PIF is likely to continue investing heavily in Saudi Arabia,” said Valecha.

PIF has set ambitious goals within its strategy, including increasing its total AuM to approximately SAR4 trillion, driving the fund and its subsidiaries’ contribution to non-oil GDP to a cumulative SAR1.2 trillion.

“For the last eight years, Saudi Arabia has gone out to the rest of the world with an open hand of money. Now the fist is clenching and pulling back to the country,” an unnamed London investment banker told the Financial Times.

Banking sources in the region added that Saudi Arabia was now increasingly demanding that international partners hire local employees and invest in domestic companies and projects.

An example given was a recent deal by US asset manager BlackRock, which secured a $5 billion deal with PIF with a clear mandate to invest it in developing the Gulf state’s capital markets.

Since 2017 the annualised returns for PIF increased to 8.7 percent in 2023, up from 8 percent the previous year.