Public Investment Fund of Saudi Arabia
What Is the Public Investment Fund of Saudi Arabia?
The Public Investment Fund (PIF) of Saudi Arabia was laid out in 1971 and is that nation's sovereign wealth fund. It gives financing to useful commercial ventures that are strategically vital for the development of the Saudi Arabian economy. The fund supplements private sector efforts with extra experience and capital resources.
Understanding the Public Investment Fund of Saudi Arabia
The Public Investment Fund has supported various tasks in important sectors of the Saudi Arabian economy, including petroleum processing plants, petrochemical industries, pipelines and storage, transportation, energy, minerals, water desalination, and infrastructural facilities. It has likewise taken part in the capital funding of a number of bilateral and Pan Arab corporations.
In 2015, Saudi leaders started to move toward giving greater authority and to the PIF, in arrangement with its Vision 2030 objectives. The fund's current governance comprises of a Board of Directors and more modest Board councils. Board jobs and obligations incorporate strategy and arranging; governance, regulation, enlistment and remuneration; reporting and checking; and investment. Investment choices center on building a diversified portfolio for Saudi Arabia that holds back nothing, appealing, risk-adjusted returns.
The Public Investment Fund has put in place normalized procedures and rules to administer investment choices, zeroed in on building a diversified portfolio that accomplishes alluring, risk-adjusted returns over the long term. As of October 2021, the PIF held $430 billion in assets under management, including public and private Saudi companies as well as international investments.
The PIF and Other Sovereign Wealth Funds
Numerous countries make sovereign wealth funds (SWFs) to expand their revenue streams. For instance, since the United Arab Emirates (UAE) fundamentally depends on oil exports for its wealth, its sovereign wealth is split up among several SWFs that comprise of a scope of different assets that assist with shielding the nation from oil-related risk. SWFs have tremendous economic power. In October 2021, for instance, the Abu Dhabi Investment Authority had a portfolio of $650billion, and Norway's sovereign wealth fund, the biggest in the world, surpasses $1.35 trillion.
Numerous sovereign wealth funds will look to asset management firms for support in dealing with their portfolios. These organizations, like Neuberger Berman, Morgan Stanley Investment Management, and Goldman Sachs Asset Management give their clients (which incorporate many high net worth and institutional investors, for example, hedge funds, gifts, pensions, and family offices) more diversification and investing options than they would have all alone.
These investment managers earn income by charging service fees or commissions to their clients. At times, managers charge set fees; in others, they charge a percentage of the total assets under management (AUM). For instance, assuming a manager is dealing with an investment worth $6 million and charges a 2% commission fee, it possesses $120,000 of that investment. Assuming the value of the investment increments to $10 million, the AMC claims $200,000. In the event that the value falls, so too does the manager's stake.
Highlights
- Laid out in 1971 by Royal Decree, the PIF has financed many key Saudi ventures and companies and offered financial help to undertakings of strategic significance to the national economy.
- The Public Investment Fund (PIF) of Saudi Arabia is one of the biggest sovereign wealth funds in the world.
- Starting around 2021, the fund holds close to $430 billion in domestic and international investments.
