For decades, PIF was a little known and largely inactive holding fund. But a sudden burst of dealmaking and the central role it is being given in the kingdom’s reform plans have put it on course to become one of the world’s most powerful sovereign wealth funds.
When Saudi Arabia completes the initial public offering of Saudi Aramco, scheduled for 2018, it is PIF that is expected to reap the rewards — the expectation is that it will be the depository for a potential $100bn from a 5 per cent sale of the state oil company.
“After their recent deals, every private equity asset manager is salivating,” said one banker. “No wonder they are — and knocking on PIF’s door, saying I want some of that.”
Mr Rumayyan’s packed schedule at the World Economic Forum in Davos included meetings with executives from private equity groups BlackRock and Blackstone.
The fund is already showing signs of a newfound boldness. Last year, it announced it was investing $3.5bn in Uber, the car-hailing app, a deal that bankers say put it on the global map. It followed up with an agreement to splash out $45bn in a partnership with Japan’s SoftBank to launch a new $100bn technology fund.
In November, Riyadh increased its firepower by allocating SR100bn ($27bn) to the fund from the central bank’s assets, even as the government slashes spending elsewhere as it a grapples with a fiscal crisis triggered by low oil prices.Bankers close to the fund say that more assets will be allocated to PIF over time, including land and projects such as the King Abdullah Financial District, the 73 gleaming towers on the outskirts of Riyadh owned by the Saudi Public Pension Agency.
One banker estimates that the PIF’s assets could rise from about $190bn to $500bn even before Aramco’s IPO. The fund is already hiring, particularly young Saudis, as it looks to build up its capacity.
“They are mainly western educated . . . very ambitious, hungry people,” said one banker who has worked with PIF.
The force behind the transformation is Mohammed bin Salman, the powerful deputy crown prince, who is leading efforts to diversify the kingdom’s oil-dependent economy.
A few months after his father’s accession to the throne in 2015, the cabinet moved oversight of the PIF from the finance ministry to the council of economic and development affairs, a committee controlled by Prince Mohammed.
He is “very hands on and detailed”, the banker said, adding that he held board meetings for up to eight hours “until the work gets done”.