Saudi Arabia will create the world’s largest investment Fund of $2 trillion


Saudi sovereign Fund Public Investment Fund (PIF) will unite with assets of $2 trillion and will be used by the Kingdom for investment in non-primary sectors of economy, said on Friday Agency Bloomberg said Prince Mohammed bin Salman, son of king Salman. Now the assets of the PIF, according to the Sovereign Fund Institute, is $5.3 billion.

“Beyond doubt, the PIF will be the biggest sovereign investment Fund in the world,” says the Prince Mohammed, the second in line of succession to the Saudi throne. He heads the Council of economic Affairs and development, an influential body of economic planning, which was established after the accession to the throne of king Salman in early 2015. The Council supervises the activities of PIF.

Currently, according to Prince, PIF already owns stakes in National commercial Bank of Saudi Arabia, and Saudi Arabia Basic Industries Corporation (SABIC) — the world’s second largest company by volume of ethylene glycol.

Prince Mohammed said that the growth of PIF assets will begin when the Saudi state oil company Saudi Aramco goes public and its shares will be transferred to the Fund. According to a member of the Royal family, the IPO of the company may be held next year, but certainly not later than 2018 — the government plans to sell less than 5% of the company. Saudi Aramco, which the Saudi authorities plan to withdraw to the exchange, has the world’s largest oil reserves — around 260 billion barrels. As noted by Bloomberg, even if the oil price will be $10 per barrel, the company’s market value could reach $2.5 trillion.

“The IPO of the company Aramco and the transfer of its shares in PIF will actually mean that the source of income for Saudi Arabia will be an investment and not oil,” said the king’s son. He noted that now “only to diversify investments”. Bin Salman believes that the country will be able to get away from oil dependence in 20 years.

A month later the authorities will publish a “State transition plan”, which will list measures to increase non-oil revenues of the country, including by raising taxes. At the end of last year, Riyadh has carried out a series of steps to reduce expenses and hold the budget deficit within 15% of GDP.

PIF radically change their investment strategy. Now only 5% of the Fund’s assets accounted for by foreign investment — by 2020 this figure will be increased to 50%, said Bloomberg Chairman of the Board of Directors of the Fund Yasser Alrokayan. According to him, now PIF “works on several fronts — the government puts at our disposal some of their assets, lands, some companies”. Top Fund Manager also clarified that PIF “there are several projects in tourism and new for Saudi Arabian industries”. He also noted that the strategy on foreign investment PIF will be “very aggressive”.

As noted by Bloomberg, means which promises to accumulate PIF, enough “to buy Apple, Google and Berkshire Hathaway”. The current largest sovereign wealth Fund Saudi Arabia’s SAMA (Saudi Arabian Monetary Agency) has assets of $632 billion, according to Sovereign Wealth Fund Institute.

In November 2015, Reuters reported that Saudi Arabia is considering the creation of new sovereign Fund. New Fund with headquarters in new York, wrote the Agency, will invest in more risky assets than the current largest sovereign Fund of the Kingdom — the Saudi Arabian Monetary Agency (now the Fund’s assets amount to $632 billion).