Saudi Public Investment Fund set to become a world leader

31/01/2017 07:53 AST

The publically owned Saudi Public Investment Fund is looking set to become one of the world’s most powerful sovereign funds after a sudden burst deal making, Al Arabiya English reported Monday citing a report from UK daily the Financial Times.

The PIF will likely reap the benefits when Saudi completes the initial public sale of Aramco, which is due next year.

It is expected the initial five percent floatation of Saudi Aramco will raise $100 billion.

At the recent World Economic Forum PIF chief executive Yasir Al-Rumayyan was seen attending a packed schedule of meetings with executives from private equity groups BlackRock and Blackstone, the report added.

Last year saw PIF turn around with investments such as the $3.5 billion with Uber, which came after an agreement was reached to invest $45 billion in a partnership with Japan’s SoftBank to launch a new $100bn technology fund.

Estimates by one banker suggest PIF’s assets could increase from $190 billion to $500 billion – and that’s before Aramco’s IPO. The expected expansion has seen investment in extra staff, not least young Saudi professionals.

“They are mainly western educated?.?.?.?very ambitious, hungry people,” one banker who has worked with PIF told the newspaper.

It’s all part of the ripple effect from Saudi’s Deputy Crown Prince Mohammed Bin Salman, who has been tasked with leading the kingdom in its efforts to diversify its oil reliant economy.

PIF was created in 1971 and now has a portfolio of 200 investments and looks to be a vital part of the Deputy Crown Prince’s national transformation plan.

The aim of the future plans is to see the creation of technology companies that will attract young Saudis into the private sector – something that is seen as essential to Mohammed Bin Salman’s plans.

Plans are already afoot to turn Riyadh’s financial district into a free-trade zone, which would be connected to the international airport to draw in multinational interests.

Meanwhile, Saudi Arabia›s government has decided to suspend its monthly issue of domestic bonds in January, refraining from issuing local currency bonds for the fourth month in a row, the Maaal financial news service reported on Monday.

The suspension is possible because higher oil prices have improved government revenues and the government›s $17.5 billion issue of international bonds last October was successful, Maaal quoted unnamed official sources as saying.

Liquidity at banks is now good, after the government started to make payments of its debts to the private sector, and banks would be able to cover any local bond issue if one occurred, the sources added.

Although the government needs to cover a large budget deficit, it halted domestic bond issues to ease pressure on banking liquidity and bring down money rates, a strategy which has succeeded.

Finance minister Mohammed Al-Jadaan told Reuters late last month that Riyadh expected to resume monthly domestic bond sales sometime in the first quarter of 2017 and also planned to tap international debt markets again this year. Bankers believe an international issue could come as soon as in the first quarter.

Saudi Gazette