Saudi Wealth Fund Put 2008 Crisis Lesson to Use This Time Around

Having lost out on buying stocks on the cheap during the global financial crisis, Saudi Arabia’s sovereign wealth fund wasn’t going to make the same mistake twice. So, when the coronavirus pandemic sent markets into a tailspin, it was all geared up.

“The crown prince always talked about how we missed an opportunity in 2008 to invest in international markets, so we were ready,” Yasir Al Rumayyan, governor of the nation’s Public Investment Fund, said in a televised interview. The two had “talked about the things that we should do if we face something like this.”

The fund received a $40 billion transfer from the nation’s reserves in March so it could take advantage of the crash in markets, buying stakes in companies including Citigroup Inc., Facebook Inc. and cruise-ship operator Carnival Corp. By the end of June it had sold most of those stakes and switched to holding about $7 billion in exchange traded funds.

“When the coronavirus emerged, we didn’t only look at the U.S. markets, we looked at all international markets,” Al Rumayyan said. “We entered some U.S., European and Asian markets. We stayed in some, and we left some.”

The $350 billion sovereign investor is a key lever for Crown Prince Mohammed bin Salman to revive growth. He is seeking to get his economic master plan, known as Vision 2030, back on track after what may be the deepest recession the world’s largest crude exporter has experienced in decades.

Local Push

The fund is set to play a major role investing in local development projects over the next few years as the government looks to cut spending to keep the budget deficit in check.

The fund is committed, at least in 2021 and 2022, to investing 150 billion riyals ($40 billion) a year at home, Al Rumayyan said. This figure will increase annually until 2030, and could reach about 200 billions riyals a year in subsequent years, he said.

Just five years ago the PIF, as it’s also known, was a relatively sleepy, domestically focused fund with less than 100 employees. It now has 1,000 staff and ambitions to control 10 trillion riyals, Al Rumayyan said.

At the moment almost all of its assets are local. It holds large stakes in some of the kingdom’s biggest companies, including Saudi Telecom Co. and National Commercial Bank. It wants to shift that balance to about 80% of its investments being local, Al Rumayyan said.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.