Saudi Arabia PIF fund sees $8 billion writedown in megaprojects

Saudi Arabia’s mammoth sovereign wealth fund noticed a significant decline in investments in its so-called gigaprojects, amounting to an $8 billion write-down on the finish of 2024 — regardless of property below administration reaching practically $1 trillion, in response to its annual report.

Gigaproject investments declined by 12.4% to 211 billion Saudi riyal ($56.2 billion). In the meantime, property overseen by the PIF climbed 19% from the top of 2023 to round $913 billion, making it one of many largest and fastest-growing sovereign wealth funds on the planet. The gigaprojects, which embody the futuristic $500 billion Neom improvement, constituted 6% of the PIF’s property in 2024, down from 8% the 12 months prior.

The write-down comes amid decrease world oil costs and a rising fiscal deficit for the Saudi kingdom, whose financial system relies upon closely on oil regardless of efforts to diversify it and substantial nonoil income development.

The PIF’s annualized returns since 2017 dropped to 7.2% from 8.7% the earlier 12 months. The fund — which has important holdings in a spread of blue-chip corporations like Uber and Tesla, and owns main sports activities franchises like LIV Golf and British soccer membership Newcastle United — was additionally seen broadening its funding base, elevating practically $10 billion in public debt and $7 billion privately.

Worldwide investments fell to 17% of the portfolio, down from 20% the 12 months prior because the fund honed its concentrate on home investments.

A part of the rationale behind the PIF’s important leap in AUM is because of extra of Saudi state oil big Aramco being allotted to the fund. However analysts be aware that if crude costs proceed to fall, as some trade forecasters count on would be the case, the share of income that the Saudi authorities and PIF will be capable of derive from these oil investments is prone to lower in tow.

Decrease crude costs, and diminished Aramco dividends attributable to decrease oil demand projections, are anticipated to restrict PIF’s funding funds. Within the meantime, it’s anticipated to extend its investments in high-growth areas like synthetic intelligence, analysts say.

Neom, a brand new area in western Saudi Arabia being constructed from scratch that’s roughly the scale of Massachusetts, is a part of Imaginative and prescient 2030, which goals to diversify the Saudi financial system away from oil revenues and create new jobs and industries for its burgeoning younger inhabitants.

The brainchild of Saudi Crown Prince Mohammed bin Salman, Neom is slated to comprise plenty of futuristic cities and developments that the dominion expects will usher in thousands and thousands of recent residents and revolutionize dwelling and know-how within the nation. Nevertheless, finances overruns, operational problems and world oil market situations have compelled the dominion to cut back or completely shelve a few of these tasks, sources who’ve labored on Neom have informed CNBC.

The price of Neom as an entire has been estimated to be wherever between $500 billion and $1.5 trillion. After a few years of seemingly limitless spending, 2024 started to see an abrupt shift as the Saudi finances deficit grew and the worth of a barrel of oil fell nicely under what the dominion must stability its finances.