Saudi Arabia plans $2 trln fund, says deputy crown prince

Deputy Crown Prince Mohammed bin Salman recently told Bloomberg that the kingdom is preparing to create the world’s largest sovereign wealth fund to help control more than $2 trillion and help wean the kingdom off of oil. 

Under the strategy, the country will sell shares in Saudi Aramco’s parent company and transform the oil giant into an industrial conglomerate. The initial public offering is expected by 2018, or as early as next year, with plans to sell less than 5 percent of shares.

“IPOing Aramco and transferring its shares to PIF (Public Investment Fund) will technically make investments the source of Saudi government revenue, not oil,” the Prince said. “What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”

The fund will allow Saudi Arabia to invest at home and abroad and would be big enough to buy Apple Inc., Google parent Alphabet Inc., Microsoft Corp. and Berkshire Hathaway Inc. – the world’s four largest publicly traded companies.

“We are working on increasing the efficiency of spending,” said Prince Mohammed. 

He said the wealth fund already holds stakes in companies including Saudi Basic Industries Corp. (SABIC), the world’s second-biggest chemicals manufacturer, and National Commercial Bank, the kingdom’s largest lender.

The fund is looking at two opportunities outside Saudi Arabia in the financial industry, the Prince said, declining to name the possible acquisition targets. 
“I believe that we will conclude at least one of them.” 

The PIF will eventually increase the proportion of foreign investments to 50 percent of the fund by 2020 from 5 percent now, Bloomberg’s report said citing Yasir Alrumayyan, secretary general of the fund’s board.

Earlier, in July last year, PIF acquired a 38 percent stake in South Korea’s Posco Engineering & Construction Co. for $1.1 billion and the same month agreed to a $10 billion partnership to invest in Russia with the Russian Direct Investment Fund.

The fund has also been hiring specialists for markets, private equity and risk management, said Alrumayyan.

“We’re working now on different fronts,” he said. “Now the government is transferring some of its assets, lands, some of the companies to us. We have different projects in tourism and in new industries that are untapped in Saudi.”