The PIF — from a local conservative investor to a global power hunter
When countries have excess reserves they sometimes create investment vehicles that deploy that money and generate returns for the country itself. Such funds are called sovereign wealth funds (SWF) and, in some cases, they have gigantic amounts.
The money in such funds is managed partly in-house and partly by external managers in some cases. SWF investments are across the globe and in a range of asset classes including equities, debt, real estate and alternative assets such as hedge funds or private equity.
Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), is central to the government’s effort to diversify the economy away from oil under the Vision 2030 reform plan. Since 1971, and until five years ago, the PIF was acting as a holding company for government stakes in domestic businesses with a conservative investment strategy.
Amid the global financial fallout from the coronavirus pandemic the PIF has appeared as one of the world’s largest bargain hunters.
The first announcement was its 8.2 percent stake acquisition in cruise liner operator Carnival Corporation, which has been hit by the shutdown of the travel and tourism sector. Around the same time it acquired shares in energy players Suncor Energy, Canadian Natural Resources, France’s Total, and Royal Dutch Shell. Later on it started taking minority stakes in US-listed companies amounting to $7.7 billion. According to a SEC filing last week, the PIF grew its US portfolio from around $2.2 billion at the end of December 2019 to $9.8 billion at the end of March.
The PIF has disclosed other acquisitions in leading companies in different sectors including a $827.8 million stake in BP, a $713.7 million investment in Boeing, a $513.9 million investment in Marriott International, and $522 million positions in both Citigroup and Facebook. The fund also made a range of smaller bets with stakes worth between $75 million and $80 million in Berkshire Hathaway, Starbucks, Booking.com, IBM, Pfizer, and Qualcomm.
The PIF aims to become one of the largest sovereign wealth funds in the world. To achieve this strategy it is planning to build a world-class diversified portfolio through investments in attractive long-term opportunities in both local and international markets.
In my opinion, the fund has come a long way from being a sleeping passive investor in ultraconservative local investments to becoming a giant powerhouse hunting global opportunities with a focused strategic intent to maximize its value in the long run.
Basil M.K. Al-Ghalayini is the chairman and CEO of BMG Financial Group.