Saudi Fund’s Pivot Is Only Half-Complete, Reuters Columnist Says

Among the world’s major sovereign wealth vehicles, Saudi Arabia’s Public Investment Fund (PIF) has always had an unusually local focus, and that idiosyncrasy is growing.

The fund’s 2023 annual report showed that assets under management rose by almost a third last year to $766 billion, with 76% of the total invested domestically, compared to 68% in 2022 and 51% in 2021.

Spending more money in the kingdom makes sense given the PIF’s goal of helping to diversify the country away from oil. However, many of the local projects seem speculative, Karen Kwok wrote in a column for Reuters Breakingviews.

The fund’s 2023 annual report, released recently, showed that assets under management rose by almost a third last year to $766 billion, with 76% of the total invested domestically, compared to 68% in 2022 and 51% in 2021.

The local proportion is likely even higher now, after Saudi Arabia transferred 8% of state oil giant Aramco to the PIF earlier this year, swelling the fund’s assets to $925 billion.

Boosting the share of money spent at home seems reasonable, as one of the fund’s goals is to help forge a future for the country beyond oil—a key plank of Crown Prince Mohammed bin Salman’s (MBS) agenda.

It’s difficult to see how past international investments, such as giving $45 billion to SoftBank’s Vision Fund, have contributed to that goal. Instead, PIF is increasingly focusing on boosting domestic growth by investing $40 billion a year in the economy.

At the end of 2023, the largest component of the fund’s assets under management was what it calls Saudi sector development, which comprised $251 billion of investments designed to establish and promote the growth of “high-priority sectors.”

The relevant section of the annual report mentions agreements with Hyundai Motor Company and Pirelli to set up local manufacturing sites.

The local investment boost is partly out of necessity. With oil below $80 per barrel—well below the government’s fiscal breakeven price of around $96, according to the International Monetary Fund (IMF)—the Saudi state seems destined to continue running fiscal deficits.

PIF is therefore one of the few sources of funds available to sustain MBS’s pet projects.