After nearly a decade of expensive and failed investments, Mohammed bin Salman is overseeing a restructuring of the kingdom’s major wealth fund.
The visit of Saudi Arabia’s crown prince to Washington this week painted a familiar picture: the head of an oil-rich nation cozying up to President Donald Trump and the titans of American industry.
That appearance of wealth is critical to Saudi Arabia’s power and image in the United States and in its own country, where the Saudi government has promised nothing less than economic transformation for its young population. In the Oval Office on Tuesday, Crown Prince Mohammed bin Salman told reporters, without giving details, that his nation would invest $1 trillion in the United States.
But a different reality is whispering in the halls of power in Riyadh and Wall Street: the kingdom’s vaunted Public Investment Fund (PIF), which Saudi Arabia has routinely used to meet commitments like the one it made this week in Washington, is running out of cash for new investments.
That’s largely because Prince Mohammed and his aides have spent much of the nation’s largesse on projects in financial trouble, and are frantically trying to turn things around, according to 11 people briefed on their operations, including current employees, board members, investors and their representatives.
There’s Neom, a vast utopian region in the country’s far north that was supposed to feature robot workers, a ski resort and crushed marble beaches, but has faced a host of delays.
In addition, there are other more conventional projects in the PIF’s ever-expanding portfolio, but they are far from being realized, such as a coffee chain with only one store so far and dreams of exporting grains to Austria; a single ship cruise line; and an electric vehicle startup started three years ago that has yet to deliver any cars.
The kingdom continues to enjoy great oil wealth. However, its pumping capacity is severely limited by geopolitical agreements to restrict supply and by the low price of crude oil in general. The government is running a growing budget deficit and incurring debt to fulfill Prince Mohammed’s domestic promises.
Although the PIF claims to have almost $1 trillion in assets, a large portion of its portfolio is tied up in hard-to-sell assets for which public valuations are not available. Its representatives have begun telling international investors that they can hardly allocate any more money in the near future, said six people with knowledge of those talks.
Unlike other comparable sovereign wealth funds, the PIF only publishes one and a half pages of annual financial figures.
A spokesman for the fund, Marwan Bakrali, said it had $60 billion in cash and similar financial instruments. He described it as “very liquid by regional standards.”
Behind the scenes, the PIF is actively restructuring its operations under the watchful eye of the crown prince, said the people briefed, who spoke on condition of anonymity to discuss confidential business plans.
The prince has fired the head of at least one of his most vulnerable projects, Neom, according to two people briefed on the matter. Meanwhile, the fund is slashing internal financial projections for several investments, including a series of luxury Red Sea resorts that remain largely empty.
Its board is also making plans to act differently in the future, investing in more conventional areas such as publicly traded stocks and bonds, one of the people said. It hopes to double its size to $2 trillion over the next five years, although it is unclear how much will come from investment profits and how much will be new money from the Saudi government.
“As a long-term investor,” Bakrali said, “our investments will be judged over generations, not quarters, and benefits will be measured both financially and through economic and social impact.”
Meanwhile, PIF’s biggest moves in recent months have been more private investments, this time in artificial intelligence companies.
The PIF’s largest investment this fall has been the offer for a majority stake in Electronic Arts, the largest video game manufacturer in the world. PIF representatives affirm that it is a long-term investment that will end up doubling its value. People close to the fund point to another motivating factor: Prince Mohammed is an avid gamer.
Don’t call him ‘Pif’
The world of sovereign wealth funds can be a sober place. The largest in existence, the $2 trillion Norwegian Government Global Pension Fund, invests primarily in publicly traded stocks.
Funds from other countries look inward, such as India, which is prohibited from investing outside the country.
For much of its history, the PIF was not much different. It was created in 1971, funded directly by the Saudi government to finance national companies, such as banks and electrical companies run by the country.
By 2015, it had about $100 billion in assets, 50 employees, and no household names. In March of that year, a new Saudi king transferred control of the entity to his third wife’s eldest son, Prince Mohammed, then 29 years old.
And the prince made the PIF a central tool in his display of power, to such an extent that the PIF now claims that this was the year it was “reborn.”
Prince Mohammed filled the PIF with government money, taking out loans and redirecting some of the nation’s oil sales (currently estimated by outside experts at $500 million a day) to the fund. He also transferred seized assets to political opponents and family members in what was called an “anti-corruption” effort.
The government has attributed 1.1 million Saudi jobs to PIF projects, although this claim cannot be independently verified.
PIF itself now has more than 3,000 employees. Its annual report, published in August, indicates that its revenue increased 25 percent in the previous year.
The expansion has also been huge for Yasir al-Rumayyan, governor of the Fund. A regional banker for most of his career, he said in a podcast interview that Prince Mohammed initially tasked him with finding candidates to head the PIF. The prince, Al-Rumayyan said, “was not fully satisfied with the majority” and opted for the man conducting the search.
Al-Rumayyan greatly enjoyed the position — showing a visitor a photo of his yacht — and has gone so far as to sharply correct those who pronounce the fund’s name as “Pif” instead of spelling the initials, according to three people who have heard him say it.
Last year, Al-Rumayyan attended the Super Bowl with Benjamin Horowitz, whose venture capital firm manages PIF’s money, and last November he sat next to Trump at the Ultimate Fighting Championship post-election bout at Madison Square Garden.
He has acquired stakes for Saudi Arabia in American companies such as Uber and Citi, and has created a global league around his personal hobby, golf. Sports leagues and teams — including big brands such as Formula 1 and English Premier League team Newcastle United — sold stakes to PIF funds.
The PIF has also made some timely bets on public markets, including building a huge portfolio of U.S. stocks amid their pandemic nadir, which paid off when prices rebounded.
Al-Rumayyan declined to be interviewed.
Regarding the restructuring of the PIF, Ahmed al-Khateeb, a member of the PIF board of directors and Saudi Arabia’s Minister of Tourism, called the measures natural steps in Prince Mohammed’s broader effort to reform the Saudi economy.
“You stop, you evaluate what went well, what went wrong, and then you improve,” Al-Khateeb said.
Signs of financial difficulties
An important symbol of the PIF and Al-Rumayyan’s influence has been the Future Investment Initiative, dubbed “Davos in the Desert,” an annual gathering that hosts thousands of people in the country’s capital.
Historically, one of the most sought-after parties coinciding with the event has been a gathering at the palm-fringed villa of Al-Rumayyan, the former estate of a tycoon imprisoned in the infamous 2017 roundup of Prince Mohammed’s political opponents.
So when a hundred titans of global finance and industry gathered at his villa, there seemed no reason to expect anything other than the usual parade of “abu al-karavatta,” the derogatory term some locals use for tie-wearing outsiders seeking the kingdom’s money.
When Al-Rumayyan rose to deliver a few words of welcome in his personal ballroom, with waiters ready to serve lamb and rice, he was greeted by an unusual sight.
An unoccupied seat was marked with a card for billionaire Stephen Schwarzman, who had attended all the previous annual dinners and whose company, Blackstone, has amassed a small fortune from its relationship with the kingdom.
Attendees noticed Schwarzman’s absence, but he arrived, hours late (after dessert). His spokesman blamed traffic.
There was a sense of change throughout the conference, with wistful talk of a better time for Westerners, when it seemed that most businessmen who visited Riyadh returned home with cash.
This year, PIF representatives informed asset managers of new conditions for future investments: the only way to offer them more is in exchange for help rescuing their older investments, according to two fund staff members and five investors or their representatives.
In an illustrative deal outlined by a person negotiating a PIF investment, the Saudi fund indicated it would only commit more money if more than double its investment was funneled back into private Saudi companies.
The result would be that international money would flow into projects owned by the PIF, strengthening its position.
Of reinvesting PIF money into private Saudi companies, another PIF spokesman, Rupert Trefgarne, said: “There is no requirement. It is certainly encouraged.”
Even the company that runs the annual conference is on the line. Majority-owned by PIF, it hired a U.S. investment bank earlier this year to explore options, including selling itself to a third party for cash, according to two people consulted by Future Investment Initiative officials.
No such buyer could be found. The PIF now hopes to list shares of the conference organizer on the Saudi Stock Exchange, of which it also owns. The PIF spokesperson said that had always been the plan.
Rob Copeland is a financial journalist for the Times, writing about Wall Street and the banking industry.
Vivian Nereim is the lead reporter for the Times covering the countries of the Arabian Peninsula. Based in Riyadh, Saudi Arabia.
