Saudi Arabia's sovereign wealth fund plans to cut overseas investments

Saudi Arabia's sovereign wealth fund plans to cut its overseas investments by about a third, its governor told a conference in Riyadh on Tuesday, as the Kingdom taps into its resources to fund plans to wean the economy off oil. 

Speaking on a panel of business, technology and finance leaders, Public Investment Fund Governor Yasir Al-Rumayyan said the sovereign wealth fund was more focused on the domestic economy and aiming to bring the fund's international investments down to between 18 per cent and 20 per cent of the total from 30 per cent. 

Global business, technology and financial leaders have converged on the Saudi capital for the annual Future Investment Initiative (FII) summit, an opportunity for attendees to forge relations with some of Saudi Arabia's biggest companies and its $925 billion sovereign wealth fund. 

 

This year, the event may also test investor appetite in Saudi Arabia's economic transformation at a time when there are fears of widening conflict in the Middle East. 

The sovereign wealth fund is the main vehicle for Crown Prince Mohammed bin Salman's plans to steer the Saudi economy away from oil, with investments of hundreds of billions of dollars to develop new sectors and create more sustainable revenue streams. 

However, the fund has been scaling back some of its flagship "giga-projects" due to rising costs. 

Al-Rumayyan said there had been a shift in the way the fund deploys its investments towards establishing joint ventures with both international and local companies. 

"Now we see a shift from people who want us to invest or take our money to invest from there to co-investments," he told the conference. 

The country's investment minister, Khalid-al-Falih, said on Tuesday that the number of foreign companies with regional headquarters in Saudi Arabia had reached 540, ahead of a 2030 target of 500. 

An example of one will be Mizuho Bank, whose CEO Masahiko Kato said: "we will establish a regional headquarter in KAFD, in Riyadh." 

Oil remains the mainstay of the Saudi economy and Energy Minister Prince Abdulaziz bin Salman told the same event that the country was committed to maintaining crude capacity at 12.3 million barrels per day. 

Other high-profile speakers on Tuesday included Stephane Bancel, CEO of Moderna, Alphabet President and CIO Ruth Porat, and the CEOs of several of the biggest banks including Citi, Goldman Sachs and Morgan Stanley. 

Artificial intelligence, the upcoming US presidential election and the economic outlook were the main topics, and there was almost no mention of wars in the region on those panels. 

However, economist Jeffrey Sachs of Columbia University gave a speech that was critical of the United States and Israel. 

"We don't need artificial intelligence in war, we need human intelligence to stop the wars," he said to applause. 

Sachs said Israel and the US were blocking the establishment of an independent Palestinian state. 

"Until there is (a Palestinian state), there is going to be no peace in the region," he said speaking of wars in Gaza and Lebanon and concerns there may be a wider regional conflict. 

Elon Musk also joined the conference via videolink where he spoke about population decline, the need for "maximally truth seeking" artificial intelligence, and timing for sending space ships to Mars. He said he believed instead some AIs were being trained to be politically correct, with some being built with a "woke, nihilistic, in my opinion, philosophy." He estimated that by 2040, there could be billions of humanoid robots, priced between $20,000 to $25,000. That development could multiply the valuation of Tesla, according to Musk. 

"Robotic taxis makes Tesla about a $5 trillion company," Musk said. "The Optimus Robot, I think, makes Tesla a $25 trillion company." 

The Optimus robot is the humanoid robot under development by Tesla. 

US ELECTION 

With just a week to go until America elects a new president, several panelists were asked who was more likely to win. 

Citadel CEO Ken Griffin said that markets expected Donald Trump to beat Democratic Vice President Kamala Harris on Nov. 5 but that the outcome remained "almost a coin toss". 

Blackstone CEO Steve Schwarzman, who has endorsed Trump, initially said he wouldn't comment on the election before saying that Trump had a better understanding today of the how the presidency works than in 2016. 

There was also optimism about the global economy and among the bank CEOs about an increase in corporate dealmaking next year. 

Ted Pick, Morgan Stanley CEO, told another panel that the increase in activity would "be a global phenomenon", with bigger companies going public. Goldman boss David Solomon said he also expected more robust activity next year. 

Apollo Global Management CEO Marc Rowan said a Trump victory would boost merger and acquisition activity that had been dampened by the current administration and lead to investment liberalisation. 

Several executives also voiced concern that inflation was more embedded globally than believed, even as central banks prepare to cut interest rates further. 

BlackRock CEO Larry Fink said that the central bank policy "playbook" needed to be revisited because the transmission of higher rates to slow the economy had a greater lag as populations aged and due to changes in the housing market. 

"I do believe we have greater embedded inflation in the world than we've ever seen," he said.   

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