Saudi Arabia’s PIF: Driving diversification through strategic investments

Saudi Aramco’s 20-year, $11bn lease deal with Global Infrastructure Partner (GIP), a firm under BlackRock’s umbrella, for Jafurah Field Gas Plant underscores the growing international confidence in Saudi Arabia’s ongoing economic transformation. The agreement provides Aramco with upfront cash for further investment, while it retains control of production and revenues. In return, GIP receives a steady cash flow from Aramco’s fee payments each year.

PIF’s annual report showcases the sheer scale of the fund’s diversification drive

PIF’s recent annual report shows where the Kingdom’s wealth fund, one of the world’s largest, is allocating nearly one trillion dollars of capital in pursuit of this diversification. There were two key pieces of information in its 2024 report: first, PIF increased its stake in Saudi Aramco; second, the fund’s giga-project holdings were written down by $8bn, which could be for several reasons, such as cost overruns, delays, or revised estimates of future returns. Together, these developments could be taken to reflect a shift away from diversification efforts, but we disagree.

PIF’s decision to take an increased stake in Saudi Aramco was the result of share transfers from the company itself, rather than a cash injection from PIF, and doesn’t reflect a deliberate move away from investment in non-oil sectors. The transfer increases PIF’s claim on Aramco dividends, providing it with an increased cash flow that it can reinvest into diversification efforts. Additionally, although PIF has recorded an impairment against its giga-projects, its annual report shows it isn’t retreating from funding diversification efforts across the economy. Instead, the fund is rapidly increasing the scale of its local investments, particularly in sectors with the potential to further the Vision 2030 goal of diversification.

The fund has continuously increased its portfolio’s share of domestic investments

This is exemplified by PIF’s Saudi Sector Development (SSD), a dedicated collection of capital within PIF focused on investing in economic diversification and industrial advancement. From 2020 to 2024, the growth of this investment pool outstripped PIF’s total portfolio growth, rising from 4% of the portfolio to 30%. In riyal terms, this means each year billions were invested in the non-oil industries that have the most potential to attract foreign capital, creating jobs for Saudis, and increasing the Kingdom’s overall competitiveness.

We expect non-oil activities will be 59% of the economy by the Vision 2030 deadline

Together with the nuances of PIF’s increased stake in Aramco, the fund’s annual report shows that, far from shifting away from diversification efforts, the Kingdom is increasing its investment in non-oil sectoral development. We expect non-oil activities to continue to outpace headline GDP, increasing to 59% of the economy by 2030, supported by PIF’s investments. This is higher than our forecast a couple of months ago, albeit primarily due to revisions by the Saudi Arabian General Authority for Statistics, which we discussed in a recent research briefing.