Saudi sovereign fund creates $1.07bn ‘fund of funds’ to back SMEs

Saudi Arabia’s Public Investment Fund (PIF) said on Monday it is creating a SAR4bn ($1.07bn) “fund of funds” to support the growth of small and medium-sized enterprises (SMEs).

The special fund will aim to boost SMEs’ access to capital by investing in venture capital and private equity funds, according to a PIF statement.

The PIF expects the investments to create 2,600 jobs and contribute SAR400m to GDP by the end of 2020. Those figures are expected to rise to 58,000 jobs and SAR8.6bn to GDP by the end of 2027, it said.

The plans are among an array of commitments which the PIF, believed to have about $180bn of assets, is taking on under economic reforms designed to reduce Saudi Arabia’s dependence on oil exports.

Saudi officials aim to use the proceeds from the sale of some 5 per cent of state oil giant Aramco, which they expect to fetch $100bn for the PIF, to stimulate the domestic non-oil private sector and expand the fund’s investments globally.

Crown Prince Mohammed bin Salman, who is also chairman of the PIF, has said that 50 to 70 per cent of the fund’s cash would be invested domestically.

The PIF has announced a dizzying lineup of investments since reform plans were introduced last year, including $45bn in a SoftBank technology fund and $20bn in a Blackstone private equity fund focused on U.S. infrastructure.

It has also waded into the kingdom’s real estate sector, announcing plans to develop new projects in Mecca and Medina and redevelop Jeddah’s waterfront corniche.

In August, the government said it would develop resorts on about 50 Red Sea islands in a PIF-backed project, although it did not reveal how much money the fund would invest.

The PIF will also be the main investor in a 334-square- kilometre “entertainment city” near Riyadh featuring cultural and recreational facilities.