Saudi Arabia is on a high-stakes mission to buy the world

• Saudi Arabia’s public investment fund, led by Crown Prince Mohammed Salman, is going global.

• The sovereign wealth fund invests in everything from Uber and Blackstone to Heathrow and LIV Golf.

• The verdict is out on how successful he will be in his global investments.

In the months before Mohammed bin Salman celebrated his 30th birthday nearly a decade ago, Saudi Arabia’s yet-to-be-anointed crown prince received a vital key to unlocking the kingdom’s future: the full scope of his Endowment Fund. public investments.

In 2015, MBS became chairman of the sovereign wealth fund set up in 1971 by a former king at a time when it was ready to be transformed. PIF was poised to become an investment hub with a global presence.

It’s a task the fast-rising royal has not shied away from. The PIF, formally led by Governor Yasir Al-Rumayyan, has stepped up its mission to invest in major assets globally in recent years to help fulfill its mission to reduce Saudi Arabia’s economic dependence on oil.

That mission, a fundamental part of an ambitious program called Vision 2030, which MBS is responsible for, depends in part on how successful PIF is in generating profits from its big overseas bets – and using those bets to build new hot industries at home.

“MBS’s personal ambition is to make Saudi Arabia a highly visible and internationally respected post-oil economy,” Steffen Hertog, an associate professor at the London School of Economics, told Business Insider. “The PIF is by far its most important vehicle in this endeavour.”

But as PIF spreads its wings, it’s becoming increasingly unclear how much success it will have beyond the Gulf.

Saudi Arabia is going global

A look at the PIF portfolio presents a highlight reel of some of the most prolific names in global business.

In the tech sector, he pumped $3.5 billion into Uber, poured $45 billion into SoftBank’s Vision Fund, took a 60 percent stake in Tesla rival Lucid, and became the startup’s majority owner of augmented reality Magic Leap.

In addition, he pumped billions of dollars into LIV Golf, led a $415 million takeover of Newcastle United, backed a $20 billion Blackstone infrastructure fund and invested in Carnival, the largest cruise operator from the world. In June, PIF expanded its stake in London’s Heathrow Airport.

Figures released in July by GlobalSWF, a data firm that tracks sovereign wealth fund activity, found that PIF deployed more capital in the first half of 2024 than all other sovereign investors, who collectively invested nearly $100 billion in the six months. period.

The story continues

According to LSE’s Hertog, PIF’s attraction to high-profile brands is not just about making itself more visible to the West. “These are mostly corporations active in sectors that PIF and MBS see as key to Saudi Arabia’s domestic economic diversification.”

For these transactions to happen, the kingdom was occupied with a lot of courting.

In February, it held a two-day conference in Miami where Blackstone chief Stephen Schwarzman and Donald Trump’s son-in-law Jared Kushner were featured as speakers. In October, the kingdom will be ready for the global elite to descend on the capital Riyadh for the “Davos in the Desert” investment conference.

The event, which has previously attracted the likes of JP Morgan and BlackRock CEOs Jamie Dimon and Larry Fink, has proven controversial in the past. MBS’s alleged role in the 2018 killing of journalist Jamal Khashoggi, in which he denies any involvement, has given some businessmen second thoughts.

That said, the global corporate elite seems to be looking past the incident as time goes on – something the Saudis seem to be aware of. This year’s theme, “Infinite Horizons,” gives a nod to the global scope he has in mind for his future.

For global companies, fund managers and bankers, Saudi Arabia’s wealth has been a big draw at a critical time. While other investors have shown caution in the face of a higher interest rate environment, the kingdom has kept its money flowing.

That’s partly because the fund has set a goal of $2 trillion in assets under management by the end of the decade and is racing against time to meet the deadline for its ambitious Vision 2030 program.

Saudi Arabia is also locked in a tense rivalry with other economic powers in the region, such as the United Arab Emirates, where funds such as Mubadala and G42 have been busy securing their own major international deals. Bragging rights are on the table.

Risky game with high stakes

However, as Saudis prepare to continue sending their cash abroad, PIFs face some risks.

First, the fund had to learn the hard reality of getting big as a number of major overseas investments ran into financial trouble. Earlier this month, for example, PIF had to make up for a funding shortfall for Lucid by pumping in an additional $1.5 billion.

The electric vehicle maker raised more than $1 billion from the Saudis for the first time in 2018 after PIF talks with Elon Musk to take Tesla private fell through, but has struggled with a high burn rate and demand in decrease for electric vehicles.

PIF also had to support another company. According to documents released in the UK this month, the fund has invested $750 million in Magic Leap from early 2023 as it strives to introduce its immersive reality headset.

For Hertog, while companies like Lucid have “fallen on hard times” — and other PIF bets like the SoftBank Vision Fund “really haven’t done well” — it’s still too early to tell how performance will play out general. . The fund posted an annual profit in 2023 after a loss of $11 billion the previous year, Bloomberg reported, although many bets are still in their infancy.

“There are risks inherent in investing in new sectors, so what matters is not individual failures, but the performance of the entire portfolio,” Hertog said.

PIF’s entanglements with political figures also raise concerns. Donald Trump’s son-in-law Kushner, who founded private equity firm Affinity Partners in 2021, received a $2 billion commitment from PIF for his debut fund, a commitment now under investigation by the chairman of the Senate Finance Committee, Senator Ron Wyden.

In a letter released in June, the senator expressed concern that PIF and other Middle East funds “are using payments to Affinity executives as a means to influence Kushner and other politically powerful individuals.”

For Abdullah Alaoudh, director at the Center for Middle East Democracy, it seems clear that buying “a lot of influence” — or “whitewashing” as he puts it — is a key part of the fund’s overseas dealings. If potential partners can move past some of its more controversial activities, such as the Kingdom’s war in Yemen, it will be easier to complete deals.

As Hertog notes, it’s worth remembering that PIF’s top priority remains its domestic portfolio. “Although some domestic investments have been cut, the main ambition of the fund is domestic diversification,” he said.

However, Saudi Arabia seems intent on making its mark on the global stage through the PIF. The world will watch.

PIF did not immediately respond to a request for comment from BI.

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