The Saudi Sovereign Wealth Fund, Explained

The $700 billion secretive investment fund is focusing on golf, tourism, job creation and private equity.

9:48 p.m.

Saudi Arabia's sovereign fund was behind the news that the PGA Tour wanted to merge with a rival league, an upstart Saudi-backed LIV Golf. It had billions of dollars to spend in order to make this happen.

The fund is well-known in financial circles. However, the recent deal that shocked the golfing world sheds a new light on an industry that was previously described as being one of the world's most opaque.

What we know so far about the Saudi Fund

What is the Saudi sovereign Fund?

The Public Investment Fund (P.I.F.) is a pool of investments that manages over $700 billion dollars in government money.

The funds are used to invest in Saudi companies, real-estate and other ventures both domestically and internationally to generate profits.

P.I.F.

What is the global ranking of Saudi Arabian funds?

According to the Sovereign Wealth Fund Institute's statistics, Norway currently manages $1.4 billion.

Who is the Saudi fund manager?

Image

Yasir Al-Rumayyan is the governor of the Public Investment Fund. He was a banker in his former life and also served as chairman of Saudi Aramco – Saudi Arabia's national oil firm. He hosts the annual conference in Riyadh, 'Davos in the Desert' which attracts thousands of participants.

Analysts say that the Saudi Arabian de facto leader and Crown Prince Mohammed Bin Salman is the one who really controls the purse strings. He chairs the Public Investment Fund board.

Prince Mohammed made the sovereign fund an important part of his Vision 2030 plan for economic growth. This blueprint aims to free Saudi Arabia from its dependence on petroleum wealth and expand its economy in technology, health care, and other areas.

The 37-year old crown prince also has a goal to increase the Public Investment Fund assets by $3 trillion in 2030.

What are the investments of the fund?

The fund, under Prince Mohammed's leadership, has invested in a wide range of international companies including Uber, Blackstone, SoftBank, and the Japanese conglomerate SoftBank, as well as sports franchises such the English Premier League soccer club Newcastle United.

The fund also announced the purchase of 72 Boeing Dreamliners and a new airline. Its website states that it is committed to an 'green' approach.

The Public Investment Fund announced on Tuesday that LIV Golf would merge with the PGA Tour, a European Golf Circuit, and DP World Tour. This merger is aimed at creating a global golf behemoth.

What was the response?

Many people use the word "shock".

Firstly, the secretive negotiations left some important people out. The golf fans were also surprised.

Many in Saudi circles, however, were thrilled by the news. They saw it as a way to counter a negative media stream. In an interview, Prince Talal Al Faisal said: 'I won't lie, this is a moment a lot us relish.'

The LIV Tour, backed by the sovereign fund in 2021 and launched, signaled a radical break with golf's stale traditionalism. It instantly split the men's world of professional golf.

The PGA Tour viewed it as a rival league. The league attracted golfers like Phil Mickelson, who was reportedly paid $200 million to be the frontman. The PGA Tour increased its payouts to try and catch up.

Greg Norman was the Western face for LIV and had a lot of harsh words to say about it. Tiger Woods, for example, also spoke out against the league. The PGA banned some of its most well-known players after LIV stole them from the PGA Tour.

The golf world was not surprised by the new alliance. If the deal is successful, experts say it could reshape the golf industry as we know.

What happened to the deal?

Image

In secret meetings, presumably sweetened with promises of riches.

Jay Monahan, the PGA Tour commissioner, and Mr. al-Rumayyan - a Prince Mohammed confidant - have been in constant communication over the last month-and-a-half.

Monahan stated that he was aware of the fact that he would be called a hypocrite by some people. 'But circumstances do change.'

What about the controversy and the rancor?

At some point, the new league, sovereign fund, Saudi government, and royal family were all tarnished with scandal.

LIV's creation prompted litigation against the PGA Tour. The Justice Department's antitrust investigators were looking into whether the tour had hurt the labor market by trying to stop LIV.

Saudi Arabia's investment fund raised eyebrows when it entrusted billions of dollars in investments to former Trump officials. This included an investment firm that was run by Jared Kushner - the son-in law of former President Donald J. Trump - and another by Steven Mnuchin, former Treasury Secretary.

It has invested heavily in Russian infrastructure. Turkish officials claim that it played a part in the purchase of the planes used to transport the assassins of Jamal Khashoggi, a dissident Saudi journalist, to Turkey where they were killed and his body was cut up. U.S. intelligence later reported that the Saudi crown prince approved the assassination.

Saudi Arabia also plays a role as a proxy in destructive conflicts like Yemen where a Saudi coalition is fighting Iran-backed Houthi Rebels since 2015.

What will happen now?

The deal's terms were not disclosed in full, and they may still fall apart after being scrutinized by international regulators, as well as the PGA Tour board which must approve the deal.

The bitter legal battles between the two former rivals are expected to disappear under the agreement announced Tuesday. The antitrust investigation's fate is less clear.

According to the plan, Mr. al-Rumayyan will lead the board directors of the newly formed for-profit company. He was a former board member of Uber and SoftBank Group.

In an interview with the Saudi Arabian podcast "Socrates" late last year Mr. al Rumayyan declared his love for golf - 'it's really enjoyable, one of best sports' - and praised the crown princes' goals for the Public Investment Fund.

He said, "We have a complete plan for 2030. We know how to reach the first trillion and then move on to two or three trillions." "The crown prince insists on $3 trillion."

Kristian Coates-Ulrichsen, Middle East Fellow at Rice University’s Baker Institute for Public Policy called the deal ‘highly strategic’ on Prince Mohammed's part. He said that it "reaches a segment in Middle America and beyond the Beltway to really engage with them, telling the story of Saudi Arabia changing."

What was the message, he asked? This is not the Saudi Arabia that you thought you knew because of 9/11, Khashoggi or Yemen.