Saudi wealth fund PIF leads investment in $800m Middle East infrastructure fund

The Public Investment Fund, Saudi Arabia’s sovereign wealth fund chaired by the Crown Prince, has agreed to commit up to a fifth of a planned $800m Middle East infrastructure fund being established by Aberdeen Standard Investments and Investcorp.

The Aberdeen Standard Investcorp Infrastructure Partners fund has received the pledge of as much as $160m from the PIF, as the wealth fund is known, along with another $90m commitment from the Asian Infrastructure Investment Bank, according to a statement Thursday. The rest of the financing is expected to come from investors including pension funds, insurance companies, endowments, family offices and private clients, it said.

Aberdeen and Investcorp announced the fund two years ago with a view to channel investment into the Middle East’s health care, education and utilities industries. Former UK Defense Secretary Michael Fallon was appointed chairman of the fund last month.

“Today’s uncertain and challenging economic environment has created a gap between the need to develop or upgrade critical infrastructure and the resources available for such projects,” said Investcorp co-CEO Hazem Ben-Gacem.

Saudi Arabia is increasingly trying to push expenditure on new infrastructure projects out of direct spending from the Finance Ministry as it looks to narrow the budget deficit. The PIF itself is set to spend $40bn a year domestically over the next five years, with much of those outlays expected to go toward large new infrastructure and tourism-related projects.

Big player

The $430bn PIF is also becoming more important as a source of capital for fund managers in the Middle East as it embarks on a plan to support the Saudi economy’s diversification away from a reliance on oil sales. It agreed to be anchor investor in a $300m private credit fund managed by NBK Capital Partners in February, and has also established a $1.1bn fund of funds to support venture capital firms investing in the kingdom.

The infrastructure fund is part of Investcorp’s plans to boost its assets under management to $50bn. It’s also planning to begin raising a $500m Saudi investment fund later this year.

Investcorp is also currently raising a $1bn North American private equity fund to do bigger buyouts there, people familiar with the matter told Bloomberg in March. The private equity firm is currently in the process of delisting from the Bahrain stock exchange.