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Public Investment Fund

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Public Investment Fund
Founded17 August 1971; 50 years ago (1971-08-17)
FounderFaisal of Saudi Arabia
Headquarters
Riyadh
,
Saudi Arabia
Key people
Mohammad bin Salman (Chairman)
Yasir Al-Rumayyan (Governor)
AUM$500 billion[1]
Websitewww.pif.gov.sa

The Public Investment Fund (PIF; Arabic: صندوق الإستثمارات العامة) is the sovereign wealth fund of Saudi Arabia. It is among the largest sovereign wealth funds in the world with total estimated assets of at least $500 billion.[1] It was created in 1971 for the purpose of investing funds on behalf of the government of Saudi Arabia.[2]

Yasir bin Othman Al-Rumayyan in 2016

It has been characterized as among the least transparent sovereign wealth funds in the world. In 2016, the Wall Street Journal noted that none of the fund's investments were named.[2] The organization's activities have stirred controversy due to its relationship with the Saudi Arabian government and its human rights record.[3] Some of PIF's assets were transferred to the organization in 2017 after the Saudi regime conducted an "anti-corruption" purge whereby assets of 400 of Saudi Arabia's richest individuals were seized by the regime.[4]

In 2021, PIF led a consortium that purchased Premier League club Newcastle United Football Club. The takeover sparked condemnation by human rights organizations. The other 19 Premier League clubs condemned the Saudi takeover of Newcastle, stating that it damaged the brand of the Premier League.[5]

History

The Saudi Arabian Public Investment Fund (PIF) was established in 1971[6] by Royal Decree M/24[7] with the stated intent to provide financing support for projects of strategic significance to the national economy.[8] For much of its history, the PIF was a passive entity that oversaw the Saudi state's equity in listed firms.[6] When neighboring petrostates began using their sovereign wealth funds for influence, Saudi Arabia followed them.[6] The PIF expanded its staff from 50 in 2015 to nearly 500 in 2018.[6]

In July 2014, the Council of Ministers granted the PIF authority to fund new companies inside and outside the Kingdom, either independently or in cooperation with the public and private sectors, without the council's prior approval.[9] In March 2015, oversight of PIF was moved from the Ministry of Finance to the Council of Economic and Development Affairs (CEDA). As part of this process, a new PIF was appointed, chaired by Crown Prince Mohammad bin Salman Al Saud.[10] Following these changes, the Board says the fund is intended to manage a broader portfolio of current and new assets,[11] ensuring that it is aligned with the government's Vision 2030.[12] The aim is to diversify government resources and the economy and to help unlock strategic sectors.[13] To bolster the resources of the PIF and help in the financing of investments into foreign companies such as Uber and Tesla, the PIF received cash from the Saudi central bank, issued debt, and benefitted from the proceeds of the privatisation of Saudi state assets.[6]

PIF has been characterized as among the least transparent sovereign wealth funds in the world. In 2016, The Wall Street Journal noted that none of the fund's investments were named.[2] According to Steffen Hertog, a professor at the London School of Economics, the PIF "is seen as opaque, a black box. Few know what’s going on there, including sometimes other government ministries."[6] As the PIF is a ministry-operated company with an overwhelming focus on domestic investments, some scholars characterize it as a "quasi-sovereign wealth fund."[14][15][16]

In the wake of a 2017 "anti-corruption" purge in Saudi Arabia, PIF obtained numerous assets that the Saudi regime had seized from rich Saudi individuals.[4]

A 2021 report by Global SWF found that PIF's Governance, Sustainability and Resilience (GSR) score had risen by 12% to an overall score of 40% (out of 100%) that year. This was partially attributed to the fact that PIF had started to build a dedicated ESG (Environmental, Social and Sustainability) team.[17]

Investment projects

Beginning in 2015 the PIF began making a number of high-profile investments, including acquiring a 38% stake in South Korea's Posco Engineering & Construction Co. in July 2015[18] and establishing a sizable fund with French firms in October 2015. In June 2016, the PIF acquired an approximate 5% stake in Uber for $3.5 billion.

In 2016, SoftBank Group and the PIF announced that they would establish a SoftBank Vision Fund which aims to invest up to $45 billion over five years in the tech sector.[19] The SoftBank Group confirmed that during the fiscal year 2019–2020, the Vision Fund, in which Saudi Arabia invested $45 billion, incurred a loss calculated at $17.7 billion, after the value of investments was written down. The losses were related to the investments in WeWork and Uber Technologies Inc. In 39-year history of SoftBank, the Saudi Arabia-backed funds paid the group its worst ever losses, where the overall company losses were 1.36 trillion yen (more than $12.5 billion).[20]

In March 2016, it was announced that ownership of Saudi Aramco would be transferred to the PIF and that the Kingdom will seek to list 5 percent of Aramco's shares by 2017.[21]

On 20 May 2017, during the Saudi-US CEO Forum which was part of President Donald Trump's official trip to Saudi Arabia, the Public Investment Fund (PIF) announced plans to "invest $40 billion in infrastructure projects, mostly in the U.S." Saudi Arabia, which is "working to diversify its economy" entered into business deals with General Electric, Lockheed Martin, and The Blackstone Group. Blackstone, whose CEO and founder—Stephen A. Schwarzman—is a top supporter of Trump, entered into a non-binding memorandum by which the PIF committed $20 billion to the project.[22] During the CEO Forum US-Saudi, arms deals were announced including a pledge to "assemble 150 Lockheed Martin Black Hawk helicopters" in Saudi Arabia, representing 450 jobs in Saudi Arabia" as part of the "$6 billion deal for Black Hawks."[23]

PIF owns Qiddiyah,[24] spearheads the Red Sea project for luxury beach resorts,[25][26] and owns the closed joint-stock company named NEOM.[27][28] PIF owns a 5.7% stake (valued at $500 million) in concert distributor Live Nation.[29] In 2020, PIF purchased minority stakes in major U.S. companies including Boeing, Facebook and Citigroup.[30] PIF disclosed a $713.7 million stake in Boeing, around $522 million in Citigroup, a $522 million stake in Facebook, a $495.8 million stake in Disney and a $487.6 million stake in Bank of America. It also disclosed a small stake in Berkshire Hathaway.[31] PIF also disclosed an $827.7 million stake in oil company BP.[32] In 2020, PIF purchased a 2.32% stake (valued at $1.5 billion) in India's Jio Platforms,[33][34] and reduced its holdings in US stocks to $7 billion from $10.1 billion in the third quarter. It instead left a stake of $2.7 billion in Uber.[35]

In March 2019, it was revealed that PIF paid a New York communications firm, Karv Communications, $120,000-a-month in order to repair the Saudis diplomatic damaged reputation after the Assassination of Jamal Khashoggi.[36]

In 2021, PIF invested in the investment fund established by former Donald Trump administration official Steve Mnuchin just after he left government.[37]

Takeover of Newcastle United

Main article: 2021 takeover of Newcastle United

On 14 April 2020, it emerged that a deal to transfer ownership of Newcastle United F.C. for £300m had been agreed between incumbent owner Mike Ashley and a prospective buying consortium consisting of the Public Investment Fund, PCP Capital Partners and Reuben Brothers.[38] However, the Premier League controversially refused to ratify the deal and so Mike Ashley subsequently engaged in various legal proceedings against the Premier League in an attempt to complete the takeover.[39][40] On 7 October 2021, it was announced that the club would be acquired by the consortium led by the Public Investment Fund,[41] after the Premier League stated it had received "legally binding assurances that the Kingdom of Saudi Arabia will not control Newcastle United Football Club".[42]

Human rights organizations criticized the Premier League for allowing PIF to purchase a Premier League club. Amnesty International pointed to Saudi Arabia's human rights record, and said that the Premier League must introduce standards whereby human rights violators cannot own Premier League clubs.[43][44] Amnesty called the takeover "an extremely bitter blow for human rights defenders."[45] Hatice Cengiz, the fiancée of Saudi journalist Jamal Khashoggi, who was murdered by operatives of the Saudi regime, urged the Premier League to block PIF's takeover.[44]

In April 2021, Saudi crown prince Mohammed bin Salman reportedly asked British Prime Minister Boris Johnson to intervene so that the Premier League would approved PIF's takeover of Newcastle. The attempted takeover was "a blatant example of Saudi sportswashing", according to Kate Allen of Amnesty International UK.[46] The British government blocked details of its talks with the Premier League regarding the Saudi takeover, saying the disclosure could "harm" relations with Saudi Arabia.[45] The other 19 Premier League clubs condemned the takeover, saying it damaged the Premier League's brand.[5]

See also

References

  1. ^ a b "Public Investment Fund (PIF) - Sovereign Wealth Fund, Saudi Arabia - SWFI". www.swfinstitute.org. Retrieved 10 January 2021.
  2. ^ a b c Clark, Simon (1 November 2016). "Saudi Wealth Fund May Be World's Least Transparent". Wall Street Journal. ISSN 0099-9660. Retrieved 18 July 2021.
  3. ^ "Newcastle United sold to Saudi consortium amid concerns about human rights abuses". Washington Post. ISSN 0190-8286. Retrieved 8 October 2021.
  4. ^ a b "Revealed: Newcastle chairman's links to Saudi 'anti-corruption' drive". The Guardian. 16 October 2021. Retrieved 17 October 2021.
  5. ^ a b "Angry Premier League clubs demand emergency meeting on Newcastle deal". The Guardian. 8 October 2021. Retrieved 8 October 2021.
  6. ^ a b c d e f "Saudi sovereign wealth fund scrambles for resources". www.ft.com. 2018. Retrieved 8 September 2021.
  7. ^ "موقع هيئة الخبراء بمجلس الوزراء". Archived from the original on 26 February 2017. Retrieved 2 December 2016.
  8. ^ Bloomberg - The Key Questions Asked About Saudi Arabia’s $2 Trillion Fund
  9. ^ "Saudis refine blueprint for post-oil economy". al-monitor.com. 26 April 2016. Retrieved 2 December 2016.
  10. ^ "Cabinet Session 23-3-2015 - kingdom of Saudi Arabia - Ministry of Foreign Affairs". Retrieved 2 December 2016.
  11. ^ "Vision 2030 – How to achieve our vision". June 2016. Archived from the original on 25 September 2017. Retrieved 8 June 2016.
  12. ^ "Financial Times - The Saudi Reshuffle: five key reforms in Riyadh, May 2016". June 2016.
  13. ^ "Al Arabiya – full text of Vision 2030". June 2016.
  14. ^ Cumming, Douglas; Wood, Geoffrey; Filatotchev, Igor; Reinecke, Juliane, eds. (2017). The Oxford Handbook of Sovereign Wealth Funds. 1. Oxford University Press. pp. 7, 9. doi:10.1093/oxfordhb/9780198754800.001.0001. ISBN 978-0-19-875480-0.
  15. ^ "A Comparative Study of Sovereign Investor Models: Sovereign Fund Profiles". projects.iq.harvard.edu. p. 93. Retrieved 8 September 2021.
  16. ^ Das, Mr Udaibir S.; Mazarei, Mr Adnan; Hoorn, Han van der (2010). Economics of Sovereign Wealth Funds. International Monetary Fund. p. 257. ISBN 978-1-58906-927-5.
  17. ^ "Biggest Gulf Wealth Funds Are Faulted for Lagging on Governance". Bloomberg. Retrieved 4 October 2021.
  18. ^ ""Let's establish a joint venture", following a 20-minute explanation of the miracle of Incheon Songdo". POSCO Engineering & Construction., Ltd. 4 November 2015. Retrieved 22 October 2016.
  19. ^ "SoftBank Group Corp. to Establish SoftBank Vision Fund" (Press release). SoftBank Group. 14 October 2016. Retrieved 22 October 2016.
  20. ^ "SoftBank Vision Fund Posts $17.7 Billion Loss on WeWork, Uber". Bloomberg. Retrieved 18 May 2020.
  21. ^ Dobson, Paul Warner (2 October 2016). "Saudi Arabia's Vision 2030". Headline Hamster. Retrieved 22 October 2016.
  22. ^ Manchester, Julia (20 May 2017). "Blackstone, Saudis set to invest $40 billion in primarily U.S. infrastructure". The Hill. Retrieved 20 May 2017.
  23. ^ "Saudi-US arms deal includes plans for 150 Lockheed Martin Black Hawk helicopters". Arab News. Riyadh, Saudi Arabia. 20 May 2017. Retrieved 20 May 2017.
  24. ^ "Qiddiya Investment Company officially established as standalone company". Arab News. 21 May 2018. Retrieved 5 May 2019.
  25. ^ His Royal Highness the Crown Prince Announces the Launch of ‘The Red Sea’ project as an international tourist destination as part of the Kingdom’s 2030 Vision, Pif.gov.sa, 31 July 2017
  26. ^ Rob Hodgetts, Saudi Arabia launches luxury Red Sea beach resorts plan, Cnn.com, 3 August 2017
  27. ^ "UPDATE 1-Saudi NEOM set up as joint stock company run by state fund..." Reuters. 29 January 2019. Retrieved 29 January 2019.
  28. ^ "Saudi Arabia announces creation of Neom Company". Arab News. 29 January 2019. Retrieved 29 January 2019.
  29. ^ "Saudi fund acquires $500m stake in Live Nation – as the company balances 'doing the right thing' with its $3.8bn cash pot". 27 April 2020.
  30. ^ "Saudi sovereign fund discloses stakes in Citi, Boeing, Facebook". Cnbc. 16 May 2020. Retrieved 17 May 2020.
  31. ^ "Saudi Sovereign Wealth Fund Buys Stakes in Facebook, Boeing, Cisco Systems". The Wall Street Journal. 16 May 2020. Retrieved 17 May 2020.
  32. ^ "Saudi Arabia's Public Investment Fund invests billions of dollars in Boeing, Disney and Facebook shares". The National. 16 May 2020. Retrieved 17 May 2020.
  33. ^ "Jio-PIF deal: All you need to know about Saudi Arabia's PIF, the latest investor in Jio Platforms". Money Control. Retrieved 18 June 2020.
  34. ^ "Reliance Industries' Jio Platforms Has Raised INR 1.16 Lakh Crore Within 9 Weeks Through These 11 Deals". NDTV Profit. Retrieved 18 June 2020.
  35. ^ "Saudi Wealth Fund Cuts U.S. Stock Holdings, Holds On to Uber". BNN Bloomberg. 17 November 2020. Retrieved 17 November 2020.
  36. ^ Saudi Arabia fund hires PR firm in the wake of Khashoggi murder, Andrew England, 19 March 2019, Financial Times
  37. ^ Rappeport, Alan (20 September 2021). "Mnuchin's Private Equity Fund Raises $2.5 Billion". The New York Times. ISSN 0362-4331. Retrieved 27 November 2021.
  38. ^ "Newcastle United takeover deal worth £300m close". BBC Sport. Retrieved 14 August 2020.
  39. ^ "Newcastle hire lawyers in dispute with Premier League over failed Saudi-led takeover". Sky Sports. Retrieved 21 September 2020.
  40. ^ "Newcastle take Premier League to competition tribunal over takeover collapse". BT Sport. Retrieved 8 August 2021.
  41. ^ "PIF, PCP Capital Partners and RB Sports & Media acquire Newcastle United Football Club". Newcastle United. Retrieved 7 October 2020.
  42. ^ "Newcastle takeover completed: Saudi-led consortium end Mike Ashley's 14-year ownership". Sky Sports. Retrieved 7 October 2021.
  43. ^ Harpur, Charlotte. "PL told to analyse human rights record for new owners by Amnesty International". The Athletic. Retrieved 7 October 2021.
  44. ^ a b "Amnesty voices human rights concerns as Saudi takeover of Newcastle looms". Reuters. 7 October 2021. Retrieved 7 October 2021.
  45. ^ a b "Newcastle United: UK blocks details of Premier League talks to protect Saudi relations". BBC News. 8 October 2021. Retrieved 8 October 2021.
  46. ^ "Saudi crown prince asked Boris Johnson to intervene in Newcastle United bid". The Guardian. 15 April 2021. Retrieved 8 October 2021.

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