Saudi Arabia’s Sovereign Wealth Fund PIF Posts $11 Billion Loss on Global Investments

As one of the world’s largest state investors, the PIF’s financial performance offers a rare glimpse into the activities of a sovereign wealth fund that has undergone a transformation from a domestically-focused holding company to a global investment powerhouse since 2016.

Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), faced an $11 billion loss on its investments in 2022 due to the impact of falling global stock and bond prices. This marked a significant reversal from the previous year when the fund enjoyed a $19 billion profit amid the post-pandemic market rally.

Despite managing approximately $778 billion in assets, the PIF did not disclose specific figures for shareholder returns in 2022, a year when the S&P 500 Index experienced a nearly 20% decline. In comparison, the fund achieved a 25% return in 2021, roughly in line with the S&P 500 investors during that period.

The net loss attributable to the owner of the fund amounted to 36.6 billion riyals ($9.8 billion) in 2022, a stark contrast to the 81.8 billion riyals profit recorded in the previous year, according to the recently published accounts of the wealth fund.

As one of the world’s largest state investors, the PIF’s financial performance offers a rare glimpse into the activities of a sovereign wealth fund that has undergone a transformation from a domestically-focused holding company to a global investment powerhouse since 2016. The fund has aggressively pursued investments in various sectors, including video game makers, electric car manufacturers, and the development of new cities in the desert, with the ambitious goal of amassing $2 trillion in assets by 2030.

In recent months, the PIF has gained international attention for its endeavor to merge its LIV golf tournament with the PGA, highlighting the kingdom’s efforts to enhance its soft power and improve its global image through sports investments.

The PIF’s financial challenges are not unique, as other sovereign entities have also grappled with the impact of the global market downturn. Singapore’s Temasek Holdings Pte and Norway’s sovereign wealth fund reported losses and reduced returns due to similar concerns about inflation. Rising borrowing costs, and geopolitical tensions.

Despite the PIF’s investment losses, Saudi Arabia’s government managed to record its first surplus in nearly a decade, thanks to soaring oil prices and production volumes. This surplus has enabled the country to sustain its spending initiatives aimed at diversifying the economy away from its reliance on oil.

Throughout 2022, the PIF continued to expand its investment activities, establishing the Sports Investment Company as a wholly-owned subsidiary to focus on international and domestic sports investments. Furthermore, the Saudi government transferred an additional 4% stake in energy giant Aramco, valued at nearly $80 billion, to the PIF.

The fund’s investment portfolio includes a $35.6 billion stake in US equities, with holdings in companies such as Lucid Group Inc., Activision Blizzard Inc., and Uber Technologies Inc., as reported in a regulatory filing for the first quarter of the year.

As the PIF has increasingly tapped into international debt markets, it has taken steps toward greater transparency. This sets it apart from many other sovereign wealth funds in the region, which typically disclose limited information about their investments and returns.

The fund’s borrowing reached $85 billion by the end of 2022, and it successfully raised $5.5 billion through a three-part green bond sale earlier this year, demonstrating its continued access to capital markets. While the PIF faces immediate challenges due to investment losses, its long-term vision and strategic investments position it as a key player in the global investment landscape, with aspirations to shape the future of various industries and contribute to Saudi Arabia’s economic diversification goals.