May 27, 2019

Sovereign Wealth Funds Embrace Their Growing Ambitions

“The key driver for them is that they want to invest privately more than what private equity firms allow them to do,” said Francesco Rossi Ferrini, the head of JPMorgan Chase’s sovereign wealth funds advisory team for Europe, the Middle East and Africa.

Striking deals directly also helps sovereign funds save on fees charged by money managers.

But for some funds, direct investments are of strategic import. Take the Saudi fund, P.I.F. Its newfound ambition is indelibly linked to Vision 2030, the expansive economic reform plan outlined by the kingdom’s de facto ruler, Crown Prince Mohammed bin Salman. Its investments are meant to wean the world’s biggest petrostate away from oil.

To give the P.I.F. the firepower it needs for such a task, the Saudi government planned to infuse it with cash from an initial public offering of Saudi Aramco, the state-owned oil company. The transaction has since been postponed and the government has directed Saudi Aramco to buy a majority stake in Sabic, a big oil company controlled by the P.I.F. The fund also has borrowed $11 billion from international banks.

The P.I.F.’s first headline-grabbing investment came in 2016, when it invested $3.5 billion in Uber. The deal helped promote the idea of the Saudi fund as an up-and-coming investor in hot technology companies. (For Uber, the investment brought both a huge slug of cash and an investor that — unlike venture capital firms — can afford to stay on for a decade or longer.)

Afterward came investments in companies like Magic Leap, a ballyhooed player in the augmented-reality industry, and a space travel venture run by Richard Branson.

The Saudi fund was also in the middle of Tesla’s recent scandal. Conversations with P.I.F. officials over the past year left Elon Musk, the carmaker’s chief executive, convinced that the fund would finance his effort to take the company private, and he went on Twitter and posted his intentions to buy out Tesla investors — with money for such a move “secured.” But the fund had not actually taken the steps required to invest in such a transaction.

A month after Mr. Musk’s scandal broke, the P.I.F. announced its investment in Lucid.

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