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Saudi Arabia’s Public Investment Fund (PIF) has become a central player in the country’s vision to diversify its economy away from oil. This article delves into PIF’s history, investment strategy, geographic focus, and its broader impact on Saudi Arabia’s economic landscape.
Every country has a sovereign wealth fund whose main goal is to create economic well-being for its citizens through investment assets. Established in 1971, PIF has grown from a relatively small entity to one of the largest sovereign wealth funds in the world. With a diversified portfolio covering a variety of sectors including technology, real estate, energy, etc., PIF is both a domestic development promoter and an international investor.
Why and how was PIF established?
The PIF was originally established to invest in sectors that could boost Saudi Arabia’s economic growth. Initially, its activities were focused on domestic investments. However, the fund’s trajectory took a significant turn with the launch of Vision 2030 by Crown Prince Mohammed bin Salman in 2016. This strategic framework aims to reduce Saudi Arabia’s reliance on oil and diversify economic activities, with the PIF at the heart of this transformation.
Saudi Arabia has developed a long-term action plan with other oil-dependent countries with the sole goal of having a diversified portfolio while generating multiple sources of income other than oil. The reason for diversification is that it is essential for the long-term stability of the Saudi economy, especially in the face of volatile oil prices and the global shift towards sustainable development.
In response to Vision 2030, PIF expanded. It was tasked with investing in sectors beyond oil and gas, aligning its strategy with the country’s broader economic goals. This period marked the transformation of PIF from a state investment vehicle to a global financial giant, with its assets under management (AUM) reaching impressive figures.
What is AUM?
It is the total market value of investments managed by a person or entity on behalf of investors. AUM fluctuations reflect the inflows and outflows of funds into and out of the fund as well as the price performance of the assets. A fund’s management fees and expenses are usually calculated as a percentage of AUM.
In what sectors and industries does PIF invest?
PIF’s investment strategy is multifaceted, focusing on several key areas:
Technology: PIF has made significant investments in the technology sector. These include investments in artificial intelligence (AI), autonomous driving, and biotechnology. Notable investments include stakes in companies such as Uber and Lucid Motors, as well as support for tech startups through various funds and partnerships.
Damian Hitchen, CEO of Saxo Bank Middle East and North Africa, said one of PIF’s biggest investments in technology was “a $45 billion (Dh165 billion) stake in SoftBank Vision Fund and significant stakes in tech companies such as Uber and various startups”. Real estate: Domestically, PIF is a major player in Saudi Arabia’s real estate sector, investing in large developments such as the Red Sea Project and Neom – a futuristic city planned to be a hub for technological and economic innovation.
Hitchin added: “PIF is involved in large real estate developments, including King Abdulaziz International Airport in Jeddah and King Khalid International Airport in Riyadh.” Energy: While Saudi Arabia’s economy is heavily dependent on oil, PIF is investing in sustainable and alternative energy. This includes investments in renewable energy projects, as well as innovations in energy storage and efficiency.
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