Saudi's PIF Ditches Blue-chip Stocks, Adds ETFs

Saudi Arabia’s $325 billion sovereign-wealth fund continued buying US stocks as it hunted for opportunities in the economic wreckage of the coronavirus crisis, but largely exited the blue-chip positions it bought in the first quarter.

The Public Investment Fund (PIF), chaired by Crown Prince Mohammed bin Salman, disclosed stakes worth $10.1bn at the end of the second quarter, according to a regulatory filing. This included holdings in exchange-traded funds tied to the utilities and materials sectors. It also boosted its stake in Suncor Energy Inc. and Carnival Corp.

PIF’s investment drive saw it build holdings in some of the biggest global companies since the start of the coronavirus pandemic, with about $8bn worth of stakes in firms including BP Plc, Boeing Co., Citigroup Inc. and Facebook Inc. It exited all those names as well as Marriott International Inc., Walt Disney Co., Total and Royal Dutch Shell Plc.

The trading comes as the world’s largest crude exporter faces exceptional fiscal pressure following a crash in global oil markets.

The kingdom transferred about $40bn to the PIF from its central bank in March and April to boost its financial fire power for deals that represented big bets that things will return to normal sooner than later as the world recovers from the pandemic shock.

Bargain hunt

Behind the scenes, as coronavirus outbreaks disrupted commerce and drove stock prices to their lowest levels in years, the fund instructed staff to find bargains to broaden its global portfolio, people familiar with the plan have said. The fund, which until five years ago was a holding company for government stakes in domestic businesses, saw the crisis as an opportunity to boost its foreign assets, the people said.

The PIF has also made a string of high profile deals this year, including a $1.5bn investment in Jio Platforms Ltd., the telecommunications and digital services business controlled by Indian billionaire Mukesh Ambani. The fund was said to be among investors that took a $14bn stake in BlackRock Inc. In June, it completed a $70bn deal to sell its holding in chemicals maker Saudi Basic Industries Corp. to Saudi Aramco.

The fund’s mandate was broadened in 2015 to include international investments to support economic diversification and transform it from a sleepy domestic holding company into one of the world’s largest investors. A key part of Prince Mohammed’s strategy is to wean the Saudi economy off oil, which still makes up the bulk of government revenues.