PIF world’s fifth largest sovereign wealth fund post Aramco stake transfer

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Saudi Arabia’s Public Investment Fund (PIF)’s assets have surged to $925bn, as per an update on the fund’s website.

The boost in funds came from the transfer of shares from state-owned oil giant Aramco. 

PIF receives Aramco shares

PIF announced the completion of the transfer of 8 per cent of Saudi Aramco‘s total issued shares from the State’s ownership to PIF. Following the transfer, it said the state’s total ownership stood at 82.186 per cent of the company’s shares.

The stake is worth roughly $163.6bn, according to Aramco’s market capitalisation, LSEG data shows.

The fund has held a 4 per cent stake in Aramco since 2022 and indirectly holds another 4 per cent that was transferred last year to Sanabil, which it wholly owns.

The transfer “is a continuation of Saudi Arabia’s long-term initiatives to boost and diversify the national economy and expand investment opportunities in line with Saudi Vision 2030,” state news agency SPA said on Thursday, citing Crown Prince Mohammed bin Salman, who chairs PIF.

“The transfer will also solidify PIF’s strong financial position and credit rating,” SPA added.

PIF has raised $7bn from two separate debt sales this year, taking advantage of strong investor demand for emerging-market issuers.

Its total debt is estimated at around $36bn, Global SWF said in a report dated February 29, adding that the sovereign fund was unlikely to halt its borrowing spree.

“The transfer will provide (the PIF) with over $9bn in annual dividend revenue from Aramco,” said Justin Alexander, director of Khalij Economics and GCC analyst for Global Source Partners.

PIF Governor Yasir al-Rumayyan, who also chairs Aramco, said last month the fund planned to increase its deployment of capital to $70bn a year after 2025, from $40bn to $50bn currently.

Aramco’s shares closed at SAR31.75 ($8.47) on Thursday, slightly below their 2019 IPO price of SAR32, giving it a market capitalisation of nearly $2.05tn.

PIF nears $1tn in assets

The PIF currently ranks number five globally in terms of sovereign wealth funds by asset size. The top four SWFs globally are Norway Government Pension Fund Global ($1.65tn), China Investment Corporation ($1.35tn), SAFE Investment Company ($1.09tn) and Abu Dhabi Investment Authority ($993bn).

PIF invested $31.5bn last year to become the world’s top spending sovereign wealth fund.

Before the transfer, it had roughly $700bn in assets under management and aims to grow that to $2tn by 2030.

“This is a private transfer and the Company is not a party to the transfer and did not enter into any agreements or pay or receive any proceeds from the transfer,” Aramco said in a filing on the Saudi Exchange.

“The transfer will not affect the Company’s total number of issued shares, and the shares transferred will rank equally alongside other existing ordinary shares in the Company,” it said, adding it would have no impact on its operations, strategy, dividend policy or governance framework.

The state has infused a significant amount of cash into PIF, including a $40bn transfer in 2020, as it seeks to overhaul the kingdom’s economy and cut reliance on oil revenue.

Economic diversification

Among its long list of endeavours, NEOM is a planned futuristic city in the desert that is set to host the 2029 Asian Winter Games. The Saudi Crown Prince said in July 2022 that NEOM would publicly list this year and that its first phase alone would cost about $320bn.

“The funding requirements for progressing with various projects is increasing,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

“The move reflects both the central role of the PIF in driving economic diversification and the importance of oil revenues for funding the investment programme. The government will likely receive a smaller share of the overall dividend payment, but the main objective is to progress with economic transformation.”