Saudi Arabia PIF fund sees $8 billion writedown in megaprojects

Saudi Arabia’s sovereign wealth fund experienced a significant decline in investments in gigaprojects, resulting in an $8 billion write-down by the end of 2024. Despite this, assets under management surged to nearly $1 trillion, as reported in the annual review.

Investments in gigaprojects decreased by 12.4% to 211 billion Saudi riyal ($56.2 billion). However, the total assets overseen by the Public Investment Fund (PIF) saw a 19% increase from the previous year, reaching around $913 billion. The gigaprojects, including the ambitious Neom development worth $500 billion, accounted for 6% of PIF’s assets in 2024, down from 8% in the previous year.

This write-down occurred amidst lower global oil prices and a growing fiscal deficit in Saudi Arabia, prompting efforts to diversify the economy and boost nonoil revenue streams.

The PIF’s annualized returns decreased to 7.2% from 8.7% in the previous year. The fund, known for its investments in companies like Uber and Tesla, as well as ownership of sports franchises, also expanded its funding sources by raising $10 billion in public debt and $7 billion privately.

International investments decreased to 17% of the portfolio, down from 20% in the previous year, as the fund shifted focus to domestic investments.

The increase in AUM was attributed partially to more of Saudi Aramco being allocated to the fund. However, analysts caution that a continued decline in crude prices could affect revenue derived from oil investments.

Lower oil prices and reduced Aramco dividends are expected to impact PIF’s investment capabilities. The fund is anticipated to increase investments in high-growth sectors like artificial intelligence to offset these challenges.

Neom, a futuristic region in western Saudi Arabia, is a key component of Vision 2030, aiming to diversify the economy and create new opportunities. However, budget overruns and market conditions have led to scaling back or shelving projects within Neom.

The overall cost of Neom is estimated to range from $500 billion to $1.5 trillion. As Saudi Arabia faces budget deficits and declining oil prices, there has been a shift towards more conservative spending practices.