Saudi Arabia wealth fund builds team to hunt for global bargains

Saudi Arabia’s $320bn sovereign wealth fund has reassigned some staff to finding quick trading wins in global markets battered by the coronavirus pandemic.

The Public Investment Fund, which until five years ago was a holding company for government stakes in domestic businesses, sees this as an opportunity to broaden its global portfolio, according to people familiar with the fund, who asked not to be identified because the matter is private.

So far, its acquisition of stakes in energy and entertainment firms represent big bets that things will return to normal sooner than later as the world recovers from the pandemic shock.

The PIF is looking into “any opportunity” arising from the economic wreckage of the crisis, said the fund’s governor, Yasir Al-Rumayyan at a virtual event last week. The fund expects to see “lots of opportunities,” he said, citing airlines, energy and entertainment companies as examples.

The PIF’s mandate was broadened in 2015 by Crown Prince Mohammed bin Salman to include international investments to support economic diversification. It will take some massive home runs to make a difference for the oil-rich kingdom, which is losing foreign reserves at the fastest rate since at least 2000.

The central bank’s net foreign assets last month dropped more than 5 per cent from February to $464bn, the lowest since 2011, according to data compiled by Bloomberg.

While a fund spokesman declined to provide any details about the new investing team – its manager or its composition – he said the strategy was to “actively seek strategic opportunities in Saudi Arabia and around the world that have strong potential to generate significant long-term returns.”

‘Any opportunity’
The fund’s biggest wagers are in the industry Saudi Arabia knows best. In recent weeks, it has amassed $1bn of stakes in four European energy firms – Equinor ASA, Royal Dutch Shell, Total SA and Eni SpA.

There’s also a view that enough people will drop newly acquired social-distancing habits: it took an 8.2 per cent stake in Carnival Corp. after the cruise operator’s shares slumped due to the coronavirus and has agreed to buy a majority stake in English Premier League football club Newcastle United.

And this week the fund reported it built a 5.7 per cent stake – worth more than $450m – in Los Angeles-based concert promoter Live Nation Entertainment after its shares fell almost 50 per cent since the start of the year.

The approach isn’t just a bet on companies but on the behavior of the whole market, whether the big losers lead any rebound.

And “while recovery from the coronavirus crash looks rather typical, it may ultimately result in something highly unusual – a continuation of the secular leadership that dominated the pre-recession experience,” according to Gina Martin Adams, chief equity market strategist at Bloomberg Intelligence.