Oil on the Money

oil x nil

Last week, a Sports Illustrated report revealed that CU Boulder’s football team sought NIL funding from Saudi Arabia’s Public Investment Fund

PIF is among the largest sovereign wealth funds in the world, with assets just under $1 trillion

While the Saudi wealth fund is known as a source of easy money for fund managers, a recent pivot in internal strategy could change that

Saudi Arabia’s updated Investment Law is shifting the fund’s focus back to domestic projects, with the aim of diversifying its oil dependent economy

In today’s edition: PIF history, Vision 2030, sportswashing, and more

race to two t’s

Saudi Arabia PIF was instituted by King Faisal bin Abdulaziz al Saud in 1971

The original objective of the fund was to provide financing for strategic projects domestically

43 years later, when crown prince Mohammed bin Salman saw other sovereign funds wielding international influence, PIF took a left turn

From 2015 to 2018, Saudia Arabia’s PIF headcount grew 10X (50 → 500)

Headcount is currently at 2,500

PIF received funding by

• cash from the Saudi Central Bank

• issuing debt

• divesting from private state assets

The Saudi government’s Vision 2030 declared that PIF would become the largest sovereign wealth fund, with $2T AUM by 2030

AUM is currently hovering underneath $1T, with $925B as of Q1 ‘24

PIF trails other oil rich sovereign funds such as Norway’s NBIM and Abu Dhabi's ADIA. China’s CIC also has more assets

In order to hit a target of $2T in just 6 years, drastic growth must take place from both a capital appreciation standpoint + new dry powder

• Assuming PIF’s avg 8% return continues, it would hit $1.3T by 2030, falling short by $700B

• Assuming a 14%+ return, it would meet the $2T goal

• The fund is expected to liquidate a portion of its Aramco holdings + raise debt to hit their target

saudi money

One of the primary differences between PIF and other large sovereigns is their eccentric investing activities

• Softbank Vision Fund: PIF wrote a $45B check for Softbank’s $100B Vision Fund that has become infamous for its high profile losses including WeWork. Vision Fund has generated 3% IRR according to reports

• Newcastle United: PIF led a controversial takeover of Premier League’s Newcastle United, which saw fans protesting the sovereign’s involvement, the crown prince threatening Boris Johnson, and Premier League owners attempting to veto the bid. PIF currently owns 80% of the club

• LIV Golf: PIF funded the richest golf tournament in history and convinced star players to defy the PGA’s monopoly. Ludicrous salary offers led to reports of Tiger Woods turning down nearly $1B.

Other PIF holdings include:

• Uber

• Blackstone Infrastructure Fund

• Heathrow Airport

• Rocco Forte Hotels

• EA, Activision Blizzard, and Nintendo

Pivoting back to the objective of Vision 2030, the Saudis want to do more than just be the largest sovereign fund

In recent years, PIF has cut back on deploying capital into Western projects.

Part of this pivot means investing in highly ambitious domestic projects known as “gigaprojects”

Neom is the gigaproject of gigaprojects

• a futuristic city 30X the size of New York City, located on the coastline of the Red Sea

• according to PIF’s site, it will “operate entirely on renewable energy, fostering a diverse and talented community that delivers globally impactful solutions”

• requires $500B+ in investment, of which half will come from PIF

Headlines

• Y-Combinator makes its first weapons industry bet. Business Insider article here

• Native American private equity firm makes $154M bet on Premier League team. FOS article here

• Zuckerberg says White House pressured Meta to censor Covid-19 content. CNBC article here