Introducing the world’s flimsiest sovereign wealth fund

Your columnist While in Riyadh in 2016, Mohammed bin Salman donned robes and sandals to announce Vision 2030, which aims to end what the crown prince described as oil addiction in Saudi Arabia. Saudi Arabia’s de facto ruler has spoken of selling a stake in Saudi Aramco, the world’s largest oil company, to fund a huge sovereign wealth fund (SWFs), worth $2 trillion to invest in diverse industries other than oil. He will be its chairman, patron and mastermind. In a veiled dictatorship like Saudi Arabia, it was dizzying, even if some of it sounded normal. The most striking event occurred later when a palace official invited Schumpeter to a café. Young men and women sat without covering their heads and flirting openly. The atmosphere of breaking the rules was shocking.

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Today, Saudis SWFscalled the Public Investment Fund (PIF), becoming the Goliath Prince Mohammed dreamed of. The company’s asset value has ballooned to his $700 billion, his workforce exceeds his 1,400, and his global presence is growing. I also discovered the fun of flirting in public, like a young cafe-dweller. Whether you’re revolutionizing golf, buying one of Europe’s football luminaries, betting on a star video game company, building an airline from scratch or electrifying an Aston Martin, Pihu You can’t stop organizing one headline after another deal. Robert Mogielnicki of the Arab Gulf Studies Institute, a Washington-based think tank, says it has “popped out loud on the ground” with an “everything, everywhere, one time investment approach.” direct current. But it may not be as indiscriminate as one might think. A closer look reveals that there is more to its investment approach than adolescent impulses.

it starts with many SWFsOne of its aims is to convert national oil assets into global assets for long-term growth. But it also needs to foster a diversified economy at home in case oil demand declines. We have aggressive expansion plans. The company hopes to amass more than $1 trillion in assets under management by 2025, and at least double that to make it the world’s largest by 2030. SWFs on earth. Much of that growth is unlikely to come from investment returns, especially since more than two-thirds of its assets are in Saudi Arabia. Instead, it will require more public spending, including a 4% stake in Aramco worth about $80 billion received in April. How much cash is available will depend on oil prices, which are well below last year’s highs.

We don’t just rely on oil. Mogiernikki said: PIFAttracting co-investors to the Saudi project could boost the value of the company’s assets. This is where the domestic strategy coincides with the overseas strategy. The company has 75% stakes in four Saudi sports teams, and privatization could attract more investment and increase the value of the teams. He believes that over time, joint investments could also increase the value of industrial and tourism megaprojects such as Neom. PIF Aiming for a desert city utopia. The kingdom needs visitors, including wealthy tourists and wealthy investors, to turn visions into reality. for that, PIF Saudi Arabia needs to be put on the map.

The most eye-catching initiative in that pursuit is sports. Whether or not it pulls off the golf mega-merger of the century, the company is already a name to watch. The purchase of English Premier League club Newcastle United was a down payment for bigger ambitions. To transform the kingdom into a football powerhouse. Part of that strategy is attracting players like Cristiano Ronaldo, who was recently paid $200 million a year to play for the Saudi team. Don’t be surprised if such influencers are used as character references to secure the right to host. FIFA 2030 World Cup.

Such investments have led to accusations of “sportswashing,” or hiring high-profile brand ambassadors to cover up horrific human rights violations, such as the 2018 killing of Saudi-born Saudi newspaper columnist Jamal Khashoggi. washington post. But image laundering also has an economic logic. Qatar proved the worth of Max Castelli at last year’s World Cup. Juves, banks have called hosting large events a “prestige factor,” regardless of the financial gain.sports cost PIF Relatively few. However, it offers great benefits in the high-profile global market.

of PIF has made other strategic investments that are less fussy but also have domestic ripple effects. Two notables are games and clean energy. In February PIF has become the largest foreign shareholder of Japanese game company Nintendo, joining a collection of assets that include Activision Blizzard and Electronic Arts. The company wants to turn Neom into a game development hub. When it comes to decarbonisation, one of the company’s biggest overseas investments is the California-based electric vehicle Lucid (EVs)Maker. On June 26, Lucid won a contract to supply British luxury car maker Aston Martin with electric motors and battery systems. PIF Also a major shareholder. Not surprisingly, Lucid is building its first overseas factory in Saudi Arabia.

of PIFof EVs Investing shows both its dreams and its bright reality. Some of the biggest bets underperformed significantly. This includes Lucid, a venture capital investment through SoftBank’s Vision Fund, and its stake in ride-hailing company Uber. The record was also damaged at home. The Saudi National Bank is one of the largest holdings and suffered huge losses in March in an ill-timed investment in Swiss bank Credit Suisse. Mega projects such as Neom Too grandiose and in danger of appearing farcical (and Neom is under heavy human rights scrutiny over its treatment of the Haweitat people who lived there). If investors are tempted, it’s not by the glare of Potemkin’s village, but by the promise of profit.

lift the veil

There is one more big thing. PIF The advantage is its openness. Global boss Diego Lopez said: SWFs, despite being a data aggregator, no other sovereign wealth fund advertises its ambitions more publicly. It is no doubt a means of enhancing Prince Mohammed’s reputation for boldness. again, PIF Under special pressure to keep his vision from all going horribly wrong.

Read more from global business columnist Schumpeter:
Beer’s new king is a Mexican-American success story (June 20th)
What Tesla and Other Automakers Can Learn from Ford (June 13)
What the TIM Giant Spinoff Revealed About the European Telecom Industry (June 8)

Also: If you would like to write to Schumpeter directly, please send an email to: [email protected].And here is explanation About the origin of the name of the Schumpeter column. Introducing the world’s flimsiest sovereign wealth fund

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