2023-04-17 11:00:43
What we will see in this article:
Sovereign fund is a type of investment fund, a class that is making waves. Created and administered by the federal government, it comes from the English, Sovereign Wealth Funds (SWF), and is a category in which its resources are – for example – through earnings in royalties, profit from state-owned companies and surplus tax collection.
It is not an investment that is simply negotiated. Responsible government chooses the type of fund risk management. The main countries that have a sovereign wealth fund are:
- Norway;
- Singapore;
- China;
- Dubai.
What are the objectives of a sovereign wealth fund?
Sovereign funds have existed since the 1950s, the first ones being created by Kuwait and Saudi Arabia. Previously, the focus was just to acquire artifices for exploiting natural resources, taking advantage of them to use them better and yield in the future
In addition, it also allows the country to develop and finance its moments of economic crisis. Here are other good reasons:
- Develop an investment portfolio that achieves good long-term returns;
- Decrease risks to prevent them from affecting the economy in the future;
- High dependence on mineral exports;
- High surpluses coming from the current account;
- High level of savings in the country;
- Need to transform natural resources into financial assets.
Saudi Arabia in the spotlight
The Sovereign Fund of Saudi Arabia (PIF) turned the country’s economy around and joined one of the main drivers of Vision 2030, which is an economic transformation program.
Created in 1971, it helped establish companies of great importance to the economy of Saudi Arabia. Years later, in March 2014, the fund was taken over by the newly formed Council for Economic Affairs and Development (CEDA), with Crown Prince HRH Mohammed bin Salman bin Abdulaziz as chairman.
The PIF is an impact mechanism on a global scale with an investment portfolio focused on sustainable investments. Being able to leverage both cutting-edge technology and knowledge.
What is the management? How it works?
As mentioned above, the main leadership of the fund is under the presidency and guidance of Prince Mohammad bin Salman bin Abdulaziz Al Saud. While the board is responsible for overseeing the strategy, investment policy and performance of the PIF.
To complement its operations, Saudi Arabia’s sovereign wealth fund has executive management. In this group, people are responsible for reviewing strategic and operational activities, needing to analyze investment and non-investment proposals.
way to invest
The idea is for Saudi Arabia’s sovereign wealth fund to be a leading investor beyond Saudi borders. As part of the government, the strategy is to achieve financial returns with varied domestic and international investments.
Management builds its investment strategy including four local and two global. That is, within its territory, the fund supports key sectors for growth in the private sector.
Outside the country, the PIF invests in a portfolio that covers a variety of asset classes. For example, the fund invests in the most innovative companies in the world, establishing partnerships that place Saudi Arabia at the peak of trends.
Yield from a sovereign wealth fund
The heir Mohammed bin Salman manages to use Saudi Arabia’s sovereign wealth fund as an instrument to diversify the economy of one of the largest oil exporters in the world. PIF has become a way to invest globally.
As Saudi sovereign wealth fund finances are remarkable. Assets increased from US$150 billion in 2015 to US$400 billion in 2020. country also received around $30 billion from Aramco (oil company) initial public offering in 2019.
In total, $21 billion in loans were raised between 2018 and 2019. the PIF started to finance some infrastructure projects to encourage the country’s growth. A US$ 500 billion high-tech business zone and “The Line”, a carbon-free city with 1 million inhabitants that should cost between US$ 100 billion and US$ 200 billion, for example.
The idea now is to inject at least 150 billion rials (which would be around US$ 40 billion) into Saudi Arabia’s economy by 2025 and increase assets to 4 trillion rials (US$ 1.07 trillion) by this year, according to Prince Mohammed.
Don’t waste time and improve your knowledge, subscribe to our YouTube channel to explore the best investment opportunities on the market.
1681731044
#Saudi #Arabia #sovereign #wealth #fund
