The Public Investment Fund and Salman S State The Political Drivers of Sovereign Wealth Management in Saudi Arabia

Review of International Political Economy
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The Public Investment Fund and Salman’s

state: the political drivers of sovereign wealth
management in Saudi Arabia
Alexis Montambault Trudelle
To cite this article: Alexis Montambault Trudelle (2023) The Public Investment Fund and
Salman’s state: the political drivers of sovereign wealth management in Saudi Arabia, Review of
International Political Economy, 30:2, 747-771, DOI: 10.1080/09692290.2022.2069143
To link to this article: https://doi.org/10.1080/09692290.2022.2069143
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REVIEW OF INTERNATIONAL POLITICAL ECONOMY
2023, VOL. 30, NO. 2, 747–771
https://doi.org/10.1080/09692290.2022.2069143
The Public Investment Fund and Salman’s state: the

political drivers of sovereign wealth management in
Saudi Arabia
Alexis Montambault Trudelle
School of Social and Political Science, University of Edinburgh, Edinburgh, United Kingdom
ABSTRACT
Saudi Arabia’s Public Investment Fund (PIF) has grown from marginal player to the
most important economic actor in the Kingdom since 2015. Nevertheless, we know
surprisingly little about the political economy of the PIF revamp. Against an unfavor-
able macroeconomic backdrop, I argue that shifts in PIF organization and orientation
are fundamentally driven by the centralization of power within the circles of the
Saudi ruling family since the rise of Mohammed bin Salman (MBS). The fund’s gov-
ernance framework and network of insiders forming the board of directors mirror
the concentration of authority around MBS. In turn, PIF domestic activities shifted
from scattered investment patterns associated with the competing influence of
senior decision-makers to a highly authoritative and personalized strategy. Moreover,
the PIF’s response to COVID-19 further exemplifies the turn from a conservative
strategy toward a short-term oriented approach to sovereign wealth management.
Going beyond macro-level economic and institutional dynamics, the article introdu-
ces the role of political agency in SWF choices by stressing how political actors and
the distribution of power within ruling elites shape SWFs. The article thus adds to
the scholarship on domestic drivers of SWFs and contributes to debates surrounding
the interplay between states and markets under processes of financialization.
KEYWORDS
sovereign wealth funds; elite politics; Saudi Arabia; Public Investment Fund
Introduction
On April 23, 2020, a virtual event of the Future Investment Initiative (FII) hosted
by Saudi Arabia’s Public Investment Fund (PIF) brought together a group of global
investment experts to discuss the challenges of governance, macroeconomics and
technology associated with the COVID-19 pandemic. Over the conference, Yasir
Othman Al-Rumayyan, governor of the PIF, discussed the SWF’s approach and
declared to the online audience: ‘You don’t want to waste a crisis … So for us, def-
initely we are looking into any opportunities’ (England & Massoudi, 2020). Two
weeks after the conference, the US Securities and Exchange Commission (SEC)
CONTACT Alexis Montambault Trudelle a.montambault-trudelle@sms.ed.ac.uk

ß 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-
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or built upon in any way.
748 A. MONTAMBAULT TRUDELLE
filings disclosed that the PIF assumed stakes in multiple companies over the first
quarter (Q1) of 2020, growing the PIF’s portfolio of US-listed assets from $2.2 bil-
lion to $10.1 billion. However, as markets rebounded in the second quarter (Q2),
the PIF quickly exited most of its ventures in US-listed firms assumed over the pre-
vious quarter (SEC, 2020a, 2020b). The Saudi SWF reacted to the COVID-19 eco-
nomic shock not by following its stated strategy to invest with a low-risk and long-
term investment horizon but by opportunistically acquiring undervalued stocks in
developed markets to provide immediate returns. The PIF’s speculative shopping
spree amid the coronavirus outbreak is part of a broader strategic reorientation of
the fund’s activities since 2015.
The PIF was created in 1971 to support newly created state-owned enterprises but
ultimately remained a marginal player in the Kingdom. Since 2015, the fund is becom-
ing the single most important actor in Saudi Arabia’s economy and arguably the fast-
est-growing sovereign wealth fund (SWF) in the world. The PIF’s total assets under
management nearly quadrupled since 2015, growing from $150 billion to $580 billion
in 2022, making the fund as the 6th-largest (PIF, 2021; SWFI, 2022). Beyond the global
financial markets, the SWF established more than 30 firms in 10 sectors, including mili-
tary industries, power and utilities, real estate and tourism. The PIF is the centrepiece
of ambitious projects such as the $500 billion futuristic mega-city NEOM and the
Sudair Solar project, one of the world’s largest solar plants by capacity (ACWA Power,
2021; Scheck et al., 2019). The sovereign fund, which had around 40 employees in
2016, now has a staff count surpassing 1000 since 2020 (Azhar, 2020). Nevertheless, we
know surprisingly little about the political economy of the PIF revamp. Why did the
Saudi government significantly upgrade the PIF since 2015?
Since the global financial crisis and, more recently, the 2014 oil price crash, vari-
ous countries created sovereign development funds like the PIF to pursue economic
diversification and national industrial policy. In contrast to the predominant para-
digm of SWFs as primarily created to manage current account surpluses or com-
modity price booms (e.g. Aizenman & Glick, 2008; Al-Hassan et al., 2013; Das
et al., 2009), sovereign funds have increasingly become ‘demand-driven’, motivated
less by the need to capture and invest surplus wealth than by driving nation-build-
ing agendas (Dixon, 2022; Schena et al., 2018). Such trends bring the relationship
between domestic politics and SWF choices into sharp relief. Hence, a growing
body of work suggests that the logic driving SWFs is fundamentally political and
domestically oriented (Braunstein, 2017, 2019; Hatton & Pistor, 2011; Helleiner,
2009; Shih, 2009). However, whereas this literature acknowledges that state power
is closely tied to SWFs, we know little about how this relationship works; that is,
the concrete mechanisms of how political agency influences SWF decision-making.
From this perspective, the article takes on the Saudi case to develop the litera-
ture on domestic drivers of state investment funds by unpacking how political
actors, their interests and the distribution of power within the ruling elite carry sig-
nificant implications for SWFs’ choices. By analyzing both PIF’s institutional design
and investment initiatives, I argue that the concentration of political authority
moulds PIF choices as cross-temporal variation in institutional design and invest-
ment policy follows the change in state fragmentation. Without rejecting the quest
for risk-adjusted returns and a market-oriented logic at the firm level, the PIF’s
structure and investment strategy are enmeshed in elite politics characterized by a
centralization of royal authority around Mohammed bin Salman (MBS) in the
REVIEW OF INTERNATIONAL POLITICAL ECONOMY 749
post-2015 political landscape. In its historical-institutional approach, this article

looks at the period of regime change initiated in 2015 to illustrate how the central-
ization of political and economic power within the circles of the Saudi ruling fam-
ily since the rise to power of MBS is associated with shifts in the PIF’s
organization and investment strategy. The analysis relies on primary sources,
including the Capital IQ and Tadawul databases, U.S. Securities and Exchange
Commission (SEC) filings, state documents and publications, in addition to data
from company websites. Moreover, it draws on academic literature and business-
oriented news reports.
The article contributes to three interrelated streams of literature. The PIF’s swift
expansion and its central role in the Kingdom’s economy led scholars to raise con-
cerns about the extent to which the SWF is more than an engine of growth but
might also evolve as a political tool at the hands of the ruling elite (Seznec &
Mosis, 2018; K. E. Young, 2020). Nevertheless, the political drivers underlying the
PIF’s expansion receive little systematic academic attention. The article closes this
empirical gap by shedding light on the interplay of elite politics and institutional
formation behind the management and allocation of sovereign wealth in the
Middle East’s largest economy.
The research also speaks to a growing literature treating SWFs not as mere
products of macroeconomic forces but as manifestations of power distribution in
the political landscape (Braunstein, 2017, 2019; Schwartz, 2012; Shih, 2009). As the
role of political agency in SWF choices is often obscured by the analysis of generic
groups such as ‘state’ or ‘society’, I stress the role of political agents, coalitions and
rivalries within the Saudi royal circles in SWF design and use. Accordingly, the
Saudi case casts light on the concrete mechanisms of how domestic politics influ-
ence SWF governance and strategy by demonstrating how the personalized rule
and institutional design under MBS also transform SWF decision-making.
The article also seeks to contribute to broader IPE debates surrounding the
interactions between states and the global financial market. Recent research sought
to identify the sources and outcomes of patient capital (Deeg & Hardie, 2016;
Lerner & Ivashina, 2019; Thatcher & Vlandas, 2016). This literature identifies
SWFs as major pools of patient capital based on their focus on long-term, apolitical
investments alongside low pressure for short term profits. While SWFs have
become significant providers of patient equity investments in various instances, this
article moves beyond the putative conceptualization of SWFs as pure case studies
of long-term asset allocators by shifting the analytical focus towards the players
behind sovereign funds and the political relationship between actors, highlighting
how and when political agency and political choice in particular institutional con-
figuration can produce incentives towards impatience and politicization of invest-
ment decisions of state investment funds.
The article is structured as follows. The subsequent section discusses the article’s
framework rooted in the perspective of SWFs as inherently political institutions.
Thereafter, as a first step, I will engage with the conjuncture of the 2015 regime
change in more detail, addressing the age of King Salman and the rise to power of
his son MBS. Then, in a chronological review, the article moves to illustrate how
changes in the balance of power in 2015 prompted a shift in the PIF’s institutional
design and investment initiatives in the Kingdom and abroad. As a second step,
the article explores contrasting theory-informed explanations of SWF design and
use grounded in macroeconomic indicators. Finally, the last section offers

conclusions.
Internal political dynamics and sovereign wealth funds

A growing body of international political economy (IPE) literature illustrates how
SWFs are outcomes of policy decisions, themselves interwoven in a set of particular
historical and political relations and institutions. Braunstein (2017, 2019) provides
a systematic and comparative causal analysis of how legacies of state formation and
institutional settings shape SWFs in Hong Kong, Singapore and the small Gulf
states (Kuwait, Qatar, Abu Dhabi and Bahrain). The distribution of power among
groups in state-society relations expressed by different levels of concentration of
decision-making power, state autonomy, and organizational properties of the pri-
vate sector emerges as systematically related to the different types and use of
SWFs. A centralized and autonomous state facing weakly mobilized private indus-
trial interests is expected to allow the creation of developmental SWFs dominating
the industrial landscape like the PIF.
The PIF operates in a political landscape characterized by decision-making
structures highly centralized around the Al Saoud and a state apparatus mostly
autonomous from business interests. Even if the Saudi private sector significantly
developed its capacity, business tends to act as a client and a policy-taker (Hertog,
2010b). Business interest representation is still delegated to a small number of
tightly supervised and compartmentalized institutions such as the Saudi Chamber
of Commerce and Industry and Majlis Ash-Shura. Inclusion to formal institutions
of business representation is carefully monitored by the government (Hertog, 2006;
Kraetzschmar, 2015). Saudi Arabia’s state dominates politics and policymaking and
leaves little space for the emergence of organized groups in society and instead
favours personalized networks based on patron-client relationships (Hertog,
2010b). Yet, if the highly centralized political context seems to have allowed the
Saudi leadership to create a developmental SWF, how domestic politics explain
SWF governance and strategy remain obscure.
A related group of authors points to the crucial role of self-interested ruling
elites in sovereign wealth management. The assumption is that SWFs are tools to
consolidate their political dominance against internal and external threats. The gov-
ernance framework provides administrative instruments to deal with intra-elite
power balancing and ensures that sovereign wealth management is under the ruling
elite’s control (Hatton & Pistor, 2011). On the other hand, ruling elites can leverage
SWFs to take minority stakes in companies controlled by the elite and their allies
or controlling stakes in financial institutions to shape the structure of economic
development (Grigoryan, 2016; Hatton & Pistor, 2011; Schwartz, 2012). Meanwhile,
building an international portfolio allows a regime to implement investment strat-
egies to satisfy immediate demands, protecting the economic and political status
quo (Dixon, 2022).
However, ruling elites are not homogeneous groups; multiple agents may claim
authority over an institution, thus creating inconsistent policies or a situation
where various competing agents are trying to gain an advantage in a game of
power (Carney, 2018). Indeed, the Saudi polity comprises several segmented circles
of power, simultaneously competing and cooperating to perpetuate the ruling
family’s rule (Al-Rasheed, 2005; Herb, 1999). In that sense, Shih (2009) draws
attention to regime unity as the fundamental political dynamic shaping SWF deci-
sion-making. In a unified regime (when leadership change is unlikely), the leader-
ship’s perception of threat tends to decrease. Thus, SWFs may pursue long-term and
profit-maximization behavior. In contrast, in fragmented regimes where constitutional
procedures for leadership transition are vague, SWFs tend to become tools of survival.
While SWFs might be institutionalized enough to pursue market-oriented returns,
’there may be a preference for short-term advantages gained through managing an
SWF, whether it be quick profit or a way to pay off a politically powerful actor’
(Shih, 2009, p. 331). However, managers may opt for a conservative approach to miti-
gate investment losses and avoid exclusion in the event of a shift in leadership.
Building upon such existing literature, this article conceptualises SWFs as
byproducts of interactions, contested or otherwise, between various political
forces that shape decisions regarding the management and allocation of sovereign
wealth. It has been argued that the interplay between conflicts and coalitions
among a small number of princes and commoners within circles of the royal fam-
ily and institutional change at previous historical junctures shaped the form of
the modern Saudi state. During the state’s expansion of the 1950s and 1960s,
princes were provided with roles and portfolios according to seniority while satis-
fying their ambitions. Institutions were often adjusted to the authority and status
of the agent leading them or even created from scratch to strenghten or under-
mine specific players (Hertog, 2010b; Yizraeli, 1998). In the same way, it is
received wisdom in historical institutionalism that shifts in socioeconomic con-
texts or the political balance of power can generate a situation in which old insti-
tutions are put in the service of different ends as new actors come into play and
pursue their (new) goals through existing institutions. At certain definitive
moments in history, institutions can be created or expanded to give the agent an
advantage in games of power (Collier & Collier, 1991; Thelen & Steinmo, 1992).
The theoretical point of departure here is that variation in SWF form and func-
tion can, to a large extent, be explained by shifts in intra-elite political dynamics.
Nonetheless, the agency of political actors over SWF choices in existing
approaches is largely obscured by analysis of organizing features of aggregates
including ‘state’ and ‘regime’. Hence, even if IPE scholarship acknowledges that
state power and SWF choices are intimately related, we need a microfoundation
of how domestic politics influence SWF decision-making.
My proposal is to disaggregate the state for a finer-grained analysis of sover-
eign wealth management. This logic suggests distinguishing how political agency
(the players, their interests, and the distribution of power among them) and
dynamics of political contexts within historical institutional constraints shape
SWF design and use. Hence, I approach the shift in the PIF’s trajectory using a
historical-institutional analytical framework. The article first unpacks the histor-
ical political legacies and shifts within the circles of the Saudi political elite fol-
lowing the 2015 regime change. Then, through a chronological research design,
the article reviews the PIF pre- and post-2015 governance framework (organiza-
tional design, management and responsibilities) and investment strategy (time
horizon, asset classes and risk appetite) to explore how the shift in the political
balance of power since 2015 affected the fund.
The centralization of royal authority in the post-2015 Saudi

political landscape
In the early hours of January 23, 2015, King Abdullah passed away, and within
hours, crown prince Salman became King. Before 2015, Saudi Arabia’s political
landscape was portrayed as a system of segmented and hierarchical centres of
power. These institutional fiefdoms were controlled by different factions within the
ruling family, each with a life of its own, and allowed the emergence of patronage
appointments and rent-seeking clientelist networks allied to one senior prince or
another (Al-Rasheed, 2005; Hertog, 2010b). This institutional inheritance gave veto
power to various factions (royal, bureaucratic or others) with overlapping jurisdic-
tions, often resulting in bureaucratic resistance or interagency disputes over policy-
making and reforms (Hertog, 2010b).
However, King Salman’s reshuffle of government positions underlines how,
across the Saudi government, high-ranking officials now owe their position to King
Salman and crown prince MBS and not to a myriad of senior princely patrons.
The crown prince consolidated control over the top level of critical political and
economic institutions through a trusted inner circle while presenting himself as the
architect of Saudi Arabia’s top-down nation-building strategy, Vision 2030. All
influential (or potentially influential) relatives were marginalized into an outer cir-
cle and stripped of their status and influence (Davidson, 2021). The age of King
Salman marks a centralization of top-level regime structures around the crown
prince MBS.
On April 25, 2016, MBS, then deputy crown prince, unveiled Vision 2030. The
wide-ranging top-down socioeconomic reform agenda advertises the pillars driving
the Kingdom towards a post-oil economy, all attributed to the individual vision of a
new leadership embodied in MBS. Over the following months, King Salman abol-
ished by royal decree a dozen Supreme Councils involved in strategic sectors to be
replaced by a single overarching institution, the Council of Economic and
Development Affairs (CEDA), which was subsequently placed under MBS’s direction
to oversee the Kingdom’s diversification efforts (Al-Rasheed, 2021; Rundell, 2021).
In parallel, King Salman reorganized the Council of Ministers; only Salman
remains as a second-generation prince, and various princes were replaced either by
technocrats or younger princes with no power base of their own (Rundell, 2021).
The Ministry of Foreign Affairs, a stronghold controlled by Faisal bin Abdulaziz Al
Saoud (King from 1964 to 1975) between 1930 and 1975 and his son Saud (from
1975 to 2015), was placed under Faisal bin Fahran Al Saud, who gained access to
MBS’ inner circle by way of his company, Shamal Investment Company, a supplier
to MBS’s Ministry of Defence (Al Jazeera, 2019; Davidson, 2021; Rundell, 2021). In
June 2017, King Salman issued a royal decree to replace Crown Prince Mohammed
bin Nayef (MBN) and advanced MBS from deputy crown prince to crown prince
(Al-Rasheed, 2018; Hubbard, 2020). Moreover, MBN was dismissed from his well-
established and influential position as Minister of Interior, a position he held from
2012 to 2017, and his father Nayef bin Abdulaziz Al Saoud had held from 1975 to
2012. Abdulaziz bin Saud Al Saud, known as particularly close to MBS, replaced
MBN as Minister of Interior (Davidson, 2021). Furthermore, King Salman
amended the Basic Law of Government to ensure a shift towards primogeniture as
the core principle for succession. This solidifies MBS’s position in the prospect of a
transition to third-generation leadership as Salman is set to be the last second-gen-

eration King (Al-Rasheed, 2018).
Finally, on November 4, 2017, eleven senior princes and hundreds of business-
men were detained in Riyadh’s Ritz Carlton. Detainees included the wealthy entre-
preneur Prince Alwaleed bin Talal and the late King Abdullah’s sons Mishaal,
former governor of the Mecca region, Mit’ib, head of the powerful National Guard,
and Turki, the former governor of Riyadh, as they still commanded significant fol-
lowings. In the wake of the event, Abdullah bin Bandar replaced Mit’ib as the head
of the powerful National Guard and thus ended the separation between the
Ministry of Interior, National Guard and Ministry of Defence, which historically
reported to separate senior princes (Davidson, 2021; Hope & Scheck, 2020;
Rundell, 2021). The crown prince presented this measure as an anti-corruption
crackdown, but in the context of the shift in succession and government reshuffle,
the selective nature of the event instead points to an attempt to defuse intra-elite
contestation from other senior princes and their related allies and gatekeepers (Al-
Rasheed, 2021).
MBS simultaneously became crown prince, deputy prime minister, Minister of
Defence, and Chief of the Royal Court. Moreover, the Saudi crown prince is the
figurehead of Vision 2030, thereby chairman of CEDA and the PIF, which indir-
ectly grants MBS control over most civilian ministries and state-owned enterprises
and assets. Al-Rasheed (2018) claims that ‘no other prince has ever held as many
key positions at such a young age as MBS. Even at the height of creating a central-
ized state, King Faysal (d.1975) did not hold so many responsibilities’ (p. 46).
In a chronological overview, the following section will unpack how the institu-
tional changes and power shifts among the ruling elite in the post-2015 political
landscape shaped the PIF’s governance framework and investment strategy. First, the
article explores the history of the PIF from its creation in 1971 until 2015, then pro-
ceeds to analyze the fund’s governance framework and investment strategy in the
Kingdom and over the global financial market following the 2015 regime change.
Political interests, regime change, and PIF activities

The PIF from 1971 to 2015
The PIF was initially established in 1971 under the Royal Decree N M/24 as a
development fund to provide capital for new state-owned enterprises in a period of
rapid institutional expansion. From its establishment in 1971 to 2015, the PIF was
under the umbrella of the Ministry of Finance (MoF). The fund operated with
around 40 employees and acted as the investment arm of the ministry under a
manager model, where a separate fund was set up to manage assets under a man-
date given by the MoF. As a result, strong ties linked the two institutions; the fund
was embedded within the ministry, and the PIF’s managing director sat immedi-
ately next to the minister’s office (Seznec & Mosis, 2018).
By the end of the 1970s, the fund’s principal investments were in the Saudi
Basic Industry Corporation (SABIC), while also growing to be the main share-
holder in the Saudi Public Transport Company (SAPTCO), the mining and alu-
minium company Ma’aden and the national shipping carrier Bahri (Seznec &
Mosis, 2018). SABIC became the second most valuable chemical company globally,
while Ma’aden is among the ten largest mining companies judged by market capit-
alization (BrandFinance, 2021; Ma’aden, 2020). The PIF also provided various loans
to the state-owned Petromin, a national oil company established in 1962 to replace
the US-owned Aramco. For instance, the PIF attributed approximately $1 billion in
loans to facilitate the construction of the East-West Crude Oil pipeline
(McPherson-Smith, 2021). Petromin eventually fell from grace between 1983 and
1986, Aramco assumed control over the company between 1993 and 1996 and the
company was dissolved in 2005 (Hertog, 2008). Beyond non-oil diversification
objectives, the contrasting PIF ventures in Petromin and SABIC reveal how earlier
investments were intertwined with rivalries and coalitions among high-level elite
players, technocrats and a network of key merchant families.
The PIF-backed Petromin was under technocrats fostered by King Faisal (1964-
1975): the oil minister Ahmad Zaki Yamani and his right-hand man Abdulhadi
Taher, Petromin’s governor (Vitalis, 2007). Petromin became the primary vehicle
for industrialization with activities encompassing oil refineries in the Kingdom and
abroad, oil and gas exploration, glass and steel plants, power generation projects,
distribution of refined products within Saudi Arabia and even its own shipping
operations (Hertog, 2008). Following the death of Faisal in 1975, crown prince
Fahd was given great administrative liberty by new King Khaled (1975-1982) and
thus sought to foster technocrats closer to him than Yamani and Taher. The newly
established Ministry of Industry and Electricity (MOIE) under Fahd’s client, Ghazi
al-Gosaibi, restricted Petromin’s activity as the MOIE took control of petrochemi-
cals, mining, and other heavy industries. Large numbers of Petromin projects were
transferred to the MOIE to be evaluated by the Industrial Studies and
Development Center under the eye of Abdulaziz Zamil. Every Petromin project
was reformulated or dismissed. Then, the MOIE established SABIC in 1976 to con-
solidate control over petrochemicals and other heavy industry projects. SABIC was
capitalized at $2.8 billion, with 70% coming from the PIF, with Gosaibi standing as
chairman and Zamil as CEO (Hertog, 2008).
The fund’s earlier investments in Petromin and SABIC reflect a political land-
scape consisting of overlapping bureaucratic strongholds acting as veto players in
decision-making, each controlled by factions of the ruling family and their related
networks infiltrating the state apparatus and the economy. In this vein, PIF activ-
ities were subject to a constellation of distinct and competing political forces lead-
ing to reactive and scattered investment patterns. Between 1971 and 2015, the PIF
played a central role in some of the most ambitious and successful state-led eco-
nomic development projects but ultimately displayed uncoordinated and targeted
investment patterns related to the fragmented regime structure.
From 1971 to 2015, the PIF had been relegated to domestic investments, while
the country’s central bank, the Saudi Arabian Monetary Authority (SAMA), was
the central agency in charge of managing and investing Saudi sovereign wealth.
SAMA was created in 1952 as US advisor Arthur N. Young convinced King
Abdulaziz (1932-1953) and Abdullah Sulaiman, the King’s close advisor and
finance minister, of the need for banking and monetary regulations (A. N. Young,
1983). Following its creation, SAMA’s charter and the use of foreign technocrats,
based on a claim that no Saudis would have had the required training, strength-
ened its autonomy. In contrast to other agencies, SAMA was insulated from the
regular civil service structures and possessed distinct payment and recruitment
mechanisms (Hertog, 2010b; A. N. Young, 1983). SAMA managed two strictly sep-
arated portfolios: a reserve portfolio to manage the liquidity requirements of a cen-
tral bank and an investment portfolio with a stabilization mandate under SAMA
Foreign Holdings. SAMA displayed a passive investment strategy with the majority
of its portfolio invested in highly liquid and low-risk assets, mainly US Treasury
bonds (Banafe & Macleod, 2017; Bazoobandi, 2013)1. A significant portion of its
assets was short-term oriented, reflecting a conservative investment orientation to
satisfy the demands for liquidity and safety (Alsweilem et al., 2015; Banafe &
Macleod, 2017).
Furthermore, multiple ministries and other state agencies possessed their own for-
eign investment vehicles, each with their own investment strategy, whereas several
ministers embedded their private investment funds within the overall structure of
ministries2. In this sense, Smith Diwan’s (2009) study of the creation of Sanabil-al-
Saudia in 2008 shows how Saudi Arabia’s first attempt at creating an official SWF
was predominantly driven by King Abdullah’s (2005-2015) attempt to subdue intra-
state rivalries and manage the Kingdom’s fragmented investment activities.
Nevertheless, the fund rapidly fell from grace in the face of sustained interagency
disputes and was subsequently absorbed by the PIF (Sanabil Investment, 2020).
From 1971 to 2015, sovereign wealth management under SAMA was associated with
a conservative international investment orientation. The institutional fragmentation
of the Saudi political landscape created interference in establishing a coherent
national investment strategy and a separate government-owned investment vehicle
acting as a distinct sovereign fund operating across the global financial markets.
The post-2015 PIF: form follows family

In 2015, Saudi leaders started to grant more authority to the PIF. As part of these
steps, on March 23, 2015, the Council of Ministers issued the resolution N 270 for-
malizing the shift in the fund’s oversight from the MoF, known for being secretive
and insulated (Hertog, 2010b) to CEDA under the control of MBS. The PIF’s insti-
tutional framework transitioned from the manager model to the investment com-
pany model as the PIF is now set up as a separate investment company that legally
owns the assets it manages (PIF, 2017a). The SWF’s board was reconstituted and
MBS placed as chairman. In addition, the political network of high-level elite play-
ers forming the board of directors and the fund’s governance framework reflects
the centralization of authority around the crown prince and his inner circle.
Excluding MBS, of the other eight board members, three are members of the
Council of Ministers, and a total of six board members control different portfolios,
including two ministers of state, the minister of investment, commerce, tourism and
finance. On an informal level, the minister of finance, Mohammed Abdullah Al-
Jadaan, is often described as one of MBS’s closest associates, while the advisor Al-
Tuwaijri and Al-Shaikh, a minister of state, are known as trusted advisors within the
crown prince’s tight inner circle (Davidson, 2021). Finally, Yasir Othman Al-
Rumayyan, governor of the PIF, is the technocratic agent leading the SWF. Al-
Rumayyan is also chairman of Saudi Aramco, Ma’aden, and Sanabil Investment. He
also sits on various boards of directors, including the Red Sea Company, Qiddiya,
and PIF’s key foreign holdings such as Uber Technologies, the UK-based SoftBank’s
chip designer Arm Holdings, and as board director of SoftBank Group (Argaam,
2018; SoftBank Group, 2020). On a more informal level, Al-Rumayyan began his
career as a local banker but began to appear as a key member of MBS’s inner circle
in 2015 (Davidson, 2021; Hope & Scheck, 2020). Al-Rumayyan is an advisor to the
Royal Court and the General Secretariat of the Cabinet of Ministers.
To support the expansion of PIF activities, the initial staff of around 40 employ-
ees grew to 450 in 2019 and surpassed 1000 by the end of 2020 (Argaam, 2020;
Azhar, 2020). Insulated from the regular civil service’s employment structures more
conducive to patronage, the fund has its own competitive recruitment process and
remuneration structures. Nonetheless, competence has been highlighted as a signifi-
cant issue in many Gulf SWFs (Clark & Monk, 2012). The PIF launched its
Academy for Training and Development in partnership with HEC Paris, the
University of California Berkeley and AMT Training (PIF, 2021). This strives to
build the skillset of local employees either going into junior or senior positions to
drive the PIF’s increasingly sophisticated investment activities efficiently.
However, the governance structure is still conducive to influence from MBS
over day-to-day operations and promotes his grip on the mechanisms to fill senior
management positions through his ascendency over the board of directors and his
position as chairman of the Executive and Remuneration Committees. Reports
from late December 2018 and March 2020 show that various senior expatriate PIF
executives (including two heads of strategy, head of legal, head of risk, chief of
public investments, and private-equity associate) resigned and issued remarks on
the lack of analysis and consultation in addition to the micromanagement of MBS.
For instance, Eric Ebermeyer left in 2018 just weeks after joining as the fund’s
head of strategy, bemoaning MBS’s micromanagement, unclear strategy and an
unstable work environment. Cyrille Urfer followed Ebermeyer. Urfer led the PIF’s
investments in global public markets and hedge funds but claimed that ‘ideas and
deals are driven from the top down’ (Jones, 2018). In a further statement, he
added: ‘at the end of the day, the owner and the one who takes the decision is the
Saudi government, and the PIF is the tool that is supervising the execution of these
projects’ (Azhar & Kalin, 2019).
Nevertheless, proximity to the ruling group does not automatically lead to
inefficiency. The successes of Gulf state-owned enterprises (SOEs) like the SABIC
and SAMA in relation to other rentier states are attributed, among other things,
to their form of ’pockets of efficiency’, or in other terms, their autonomy associ-
ated with the direct protection of high-level unified principals in the ruling
group. Being insulated from the rest of the state apparatus, high-ranking techno-
cratic managers reporting directly to the ruler, crown prince or other senior roy-
als can focus on market-oriented management outside of political and
bureaucratic predation from senior bureaucrats and minor royals (Hertog,
2010a). Nonetheless, the PIF does not enjoy substantial decisional autonomy
from the regime leadership, a fundamental determinant of pockets of efficiency.
The concentration of royal authority around the crown prince from 2015
prompted a process of centralization among decision-making structures around a
closely knit coalition of senior royals and technocrats reflected in the PIF’s gov-
ernance structure. SWF institutional design appears as an instrument of legitim-
acy and control as much as an attempt to consolidate the appropriate governance
of sovereign wealth management.
The post-2015 PIF in Saudi Arabia’s economy

Before 2015, the PIF’s activities were limited to supporting emerging SOEs under
the pressure of multiple rival senior princes resulting in dispersed investment pat-
terns. As the government redefined the institutional structure of the PIF, the fund’s
mission evolved to act as the catalyst for economic development and enabler of the
private sector (PIF, 2021). The PIF’s recent domestic ventures demonstrate a qualita-
tive shift in the fund’s domestic investment strategy driven by the centralization of
royal authority around MBS. The SWF is now the central engine of growth in the
Kingdom’s economy driven by the ambition of MBS. The ruling elite now mobilizes
the PIF to achieve growth and structural transformation as part of a nation-building
program and explicit socioeconomic goals operationalized through targeted sectors
or intrusive wide-ranging state interventions across the Kingdom’s economy.
The SWF is now the largest investor on the Tadawul. The PIF simultaneously
perpetuates the state’s authority over the structure of economic development
through control of financial institutions and historical growth sectors such as build-
ing materials, petrochemicals, and mining. For instance, the PIF is the main share-
holder in the largest Saudi banks, the Saudi National Bank, the Riyad Bank and
Alinma Bank, which together hold 48% of market shares3 (Aljazira Capital, 2020b).
In the cement industry, the SWF holds the majority of shares in Southern Province
Cement Company, Qassim Cement, Yanbu Cement, and Eastern Cement, totalling
37% of market shares (Aljazira Capital, 2020a)4. In mining, the PIF is the largest
shareholder in the world-leading Ma’aden, with 67,18% of outstanding shares5.
This support of the domestic equity market protects the domestic economy from
volatility but also favors specific business players. Through interlocking directors
and shareholders, these PIF-targeted firms are connected to privately-owned con-
glomerates controlled by prominent business families benefiting from historical ties
with the Al Saoud, including the Al Rajhi, Alissa, Alireza, Al Zamil, Al Muhaidib
and Juffali Groups6.
However, the giga-project and sector development investment pools distinguish
the post-2015 shift in domestic PIF activities. While the fund gained the operating
right to the King Abdullah Financial District, the PIF is also the primary developer
of the flagship NEOM project, the entertainment destination Qiddiya, and the lux-
ury tourist destination The Red Sea and Soudah. (PIF, 2017b; Saudi Press Agency,
2021b). State-led large-scale projects are not a novelty in the Kingdom. Rather,
what differentiates the age of King Salman is the centralization of decision-making
structures underpinning the development of such projects under the auspices of
MBS through the PIF.
Past ventures like the cluster of economic cities under the King Abdullah
Economic City (KAEC) banner got entangled in the pitfalls of interagency feuds
and competing interests to ultimately stall (Hertog, 2010b). In contrast, the PIF is
the primary financier and sole developer of projects and thus allows the crown
prince to override the multiple entrenched veto players in Saudi economic policy-
making and drive forward his agenda. The giga-projects also diverge from typical
SWF equity investments and offer more than economic diversification and techno-
logical progress. They offer the ability to rearrange the geospatial and social envir-
onment and become concrete manifestations of the intersection between PIF
investments and the ruling elite’s political-economic strategy personified by MBS
(McPherson-Smith, 2021). Furthermore, the closed joint-stock companies charged

with developing the giga-projects are chaired by MBS and fully owned by the PIF.
They consolidate the crown prince’s oversight and provide limited space for private
sector involvement (Al Arabiya, 2020; Arab News, 2018; Saudi Press
Agency, 2021b).
The PIF also holds the role of investor, developer, and operator of completely
new ecosystems across various key domains identified as promising economic sec-
tors by the Saudi leadership via Vision 2030. For instance, the Saudi SWF launched
the Saudi Military Industries Company (SAMI) in 2017. Chaired by Ahmed Aqeel
Al-Khateeb, member of the PIF’s board and minister of tourism, SAMI localizes
the Kingdom’s military spending by developing technologies and manufacturing
products in aeronautics, land systems, defence electronics, weapons and missiles
(SAMI, 2021). SAMI launched SAMI L3 Harris Technologies, a joint venture with
L3Harris Technologies, one of the world’s largest aerospace and defence systems
manufacturers (Saudi Press Agency, 2021a). As part of the effort to enhance the
Kingdom’s tourism and entertainment opportunities, the PIF established the Saudi
Entertainment Ventures Company (SEVEN) as its investment arm to expand and
diversify entertainment and cultural activities such as concerts by various high-pro-
file artists and growing festivals.
The swift development of the military, entertainment, culture, and tourism sec-
tors help to some extent, diversify the Kingdom’s economy. However, when one
considers PIF subsidiaries almost exclusively source expertise, events and partners
from abroad, the decision to create new ecosystems appears to provide quick and
apparent manifestations of structural transformations and nation-building fitting
within the broader narrative of the new leadership as an embodiment of a new era
of diversification, openness and prosperity (Al-Rasheed, 2021). Moreover, the lucra-
tive military industry, historically under the umbrella of the Ministry of Defence,
which ’enabled princes to sign massive weapons contracts with the United States
and other Western countries to underpin alliances and networks of middlemen’,
remains under close government control through the PIF (Hubbard, 2020, p. 31).
From buying bonds to buying the dip

In support of its considerable domestic investments, the Saudi leadership aims to
transform the PIF into a ‘global investment powerhouse’ by pledging to invest 25%
of its assets in international portfolios, split between the International Diversified
Pool and International Strategic Investment Pool (PIF, 2017a, p. 21). In contrast to
the historically conservative approach to sovereign wealth management under
SAMA, mainly built around US Treasury bonds, the critical juncture of 2015
induced a shift to a strategy increasingly oriented towards short-term goals. In add-
ition to a centralization of foreign investment activities reflecting intra-elite dynam-
ics and growing external pressures such as non-regulatory political risks, the PIF’s
speculative approach to the COVID-19 shock illustrates how shifts in elite politics
are associated with a reposition of Saudi Arabia’s strategy from buying bonds to
buying the dip.
In the wake of the PIF’s expansion from 2015, the fund gained the legal pre-
rogative to invest outside Saudi Arabia, implying an overhaul of the Kingdom’s
financial management (Seznec & Mosis, 2018). The PIF’s post-2015 expansion
aggregated the Kingdom’s foreign investment activity under a single umbrella as

the SWF is now the sole foreign investor in the Kingdom (Roll, 2019). The concen-
tration of sovereign wealth management under the PIF’s umbrella, on the one
hand, helps bypass SAMA’s largely autonomous technocratic body and, on the
other, aggregates the fragmented investment vehicles under a single overarching
fund overseen by a tightly knit group of high-level insiders close to MBS.
Recent cross-country analysis demonstrates that Saudi Arabia is a clear sender
of sovereign investments with Qatar, Kuwait, Russia, China and Norway. The abso-
lute majority of Saudi foreign investments (80.4%) are in majority stakes ownership
(50.01% stakes) and indicate controlling interests (Babic et al., 2020). Moreover,
the PIF’s latest activities illustrate a preference for high-risk and high-profile ven-
tures in technology and transport. Amongst PIF’s high-profile investment decisions
is a $45 billion investment in the SoftBank Vision Fund (45% of outstanding
shares), the world’s largest techno-focused venture capital fund. Furthermore, the
PIF acquired 4.9% of Tesla in 2018 before selling its shares in 2020 to, in turn,
inject $1.3 billion for majority ownership in Silicon Valley’s Lucid Motors (Arab
News, 2021; Li, 2020). The PIF also owns 5.3% of Uber Technologies for approxi-
mately $2.3 billion. The PIF created partnerships in entertainment, hospitality, and
travel, such as a 500 million (5.73%) stake in the event promoter Live Nation
Entertainment and 8.24% of the cruise operator Carnival Corporation for $369.3
million (C. Kelley, 2020; Reuters, 2020). The SWF also acquired a 2.32% stake in
the Indian telecommunication giant Jio Platforms for $1.5 billion (Parkin &
Raval, 2020).
Despite successes in establishing various international investment partnerships
through the PIF, ‘there is a growing disconnect between the expectations of Saudi
Arabia’s government and the interests motivating the global investment commu-
nity’ (Mogielnicki, 2019). The net inflows of foreign direct investments (FDI) have
significantly declined from $39.5 billion in 2008 to a low of $1.4 billion in 2017,
and then slightly rebounded to $4.6 billion in 20197. Roll underlines that ‘the
decisive factor for the inflow of FDI is not the investment policy of the SWF, but
rather the general investment climate in Saudi Arabia’ (Roll, 2019, p. 21). This
points to growing non-regulatory political constraints facing PIF international
activities stemming from the personalization of the SWF under the crown prince’s
leadership (McPherson-Smith, 2021). In response to the alleged involvement of the
Saudi leadership, more specifically MBS, in the death of Jamal Khashoggi in
October 2018, several PIF initiatives crumbled. For instance, several world business
leaders withdrew from the 2018 Future Investment Initiative8 whereas Endeavor,
one of the largest U.S. talent agencies, called off and returned a $400 million
investment (K. Kelley & Hubbard, 2019; McPherson-Smith, 2021). The Virgin
Group cancelled a $1 billion investment and cut ties with the Kingdom citing
MBS’ involvement in the Khashoggi affair (Reuters, 2018).
On the other hand, The PIF’s investment strategy amid the economic downturn
following the 2020 coronavirus outbreak further exemplifies the shift in strategy.
The PIF reacted to the COVID-19 economic shock by opportunistically acquiring
undervalued stocks in developed markets for immediate returns. The more authori-
tative and personalized role in sovereign wealth management adopted by the Saudi
ruling elite is associated with a speculative and short-term oriented view of returns
instead of a medium to long-term perspective underpinning the PIF’s stated goal of

intergenerational wealth accumulation.
In the first quarter (Q1) of 2020, the U.S. Securities and Exchange Commission
(SEC) filings disclosed that the PIF assumed stakes in numerous US-listed compa-
nies (SEC, 2020a). In May 2020, at the outset of an economic downturn associated
with the 2020 COVID-19 outbreak, PIF investments included stakes such as $713.7
million in Boeing, $522 million in Facebook, $521.9 million in Citigroup, $514 mil-
lion in Marriott, $495.8 million in Disney, and $487.6 million in Bank of America.
Furthermore, the PIF deployed significant investments in the energy sector, which
could appear counterintuitive given the fund’s goal of diversifying the Kingdom’s
economy (Bortolotti & Fotak, 2020). The Saudi SWF disclosed an $827.8 million
stake in BP, $483.6 million in Royal Dutch Shell, $481 million in Suncor Energy,
$408.1 million in Canadian Natural Resources, and $222.3 million in Total. In add-
ition, the PIF acquired a $490.8 million stake in CISCO, $78.5 million in Pfizer,
and a $78.4 million stake in Berkshire Hathaway (Azhar & Singh, 2020; Kamel,
2020; Kane, 2020; Mogielnicki, 2020; SEC, 2020a).
In the wake of these investments, PIF officials underlined intergenerational
wealth as the key driver of the investment initiative: ‘PIF is a patient investor with
a long-term horizon. As such, we actively seek strategic opportunities both in
Saudi Arabia and globally that have strong potential to generate significant long-
term returns while further benefitting the people of Saudi Arabia and driving the
country’s economic growth’ (Kamel, 2020)9. However, as markets rebounded in the
second quarter (Q2), the PIF exited most of its ventures in US-listed firms assumed
only three to four months prior. The fund’s total US-listed holdings dropped from
24 in Q1 to 12 in Q2. For instance, the Saudi SWF released its stakes in Boeing,
Facebook, Marriott, Citigroup, Bank of America, BP, Royal Dutch, Total, IBM,
QUALCOMM, Broadcom, and Pfizer. The PIF also sold a significant part of its
shares in Berkshire Hathaway, CISCO, and Canadian Natural Resources Limited.
In turn, the SWF considerably increased its positions in ADP, Suncor Energy,
Carnival Corporation and Live National Entertainment (SEC, 2020b) (Table 1).
The PIF’s investment strategy during the economic contraction related to the 2020
coronavirus pandemic shock helped not to diversify the fund’s portfolio or position
the SWF as a ‘patient investor with a long-term horizon’ and thus ‘further benefit-
ing the people of Saudi Arabia’ but instead capitalized on the COVID-19 triggered
sell-off to buy undervalued stocks for short-term tactical investments and exped-
itious returns.
Other SWFs also saw in the COVID-19 downturn an opportunity to find
attractive investment ventures. Aside from the PIF, the other Gulf SWF with a
development mandate most active over the period was Abu Dhabi’s Mubadala,
which had invested more than $11 billion by December 2020 (Jones & Gottfried,
2020). Nonetheless, in contrast to other SWFs such as Mubadala, the PIF promptly
existed most of its positions as the market rebounded. This pattern challenges SWF
behavior during the pandemic and previous experiences of SWF investment in
times of market volatility such as the 2007-08 financial crisis. Following the 2007-
08 financial crisis, many large firms and banks sought equity investments by SWFs
based on their long-term horizon and their disposition to provide patient capital
(Deeg & Hardie, 2016). Gulf SWFs significantly contributed to the global bail-out
by recapitalizing western financial institutions. For instance, Abu Dhabi’s ADIA
Table 1. Variation in PIF US-Listed Holdings from Q1 to Q2 2020.

Market value of Q1 Market value of Q2
Company investments ($Million) investments ($Million) Change
Uber $2 033,708 $2 263,884 11.32%
BP $827,751 $0 100%
Boeing $713.677 $0 100%
Citigroup $521,979 $0 100%
Facebook $521,858 $0 100%
Marriott $513,931 $0 100%
Disney $495,802 $0 100%
CISCO $490,881 $270,754 44.84
Bank of America $487,569 $0 100%
Royal Dutch Shell $483,643 $0 100%
Suncor Energy $481,072 $859,444 78.65%
Carnival Corporation $456,856 $834,644 82.69%
Live Nation $416,119 $557,014 33.86%
Entertainment
Canadian $408,129 $298,652 26.82%
Natural Resources
Total $222,336 $0 100%
Union Pacific $78,841 $91,843 16.49%
Pfizer $78,524 $0 100%
Automatic Data $78,454 $220,631 181.22%
Processing (ADP)
Berkshire Hathaway $78,434 $39,054 50.21%
Booking.com $78,029 $34,278 56.07%
Qualcomm $77,798 $0 100%
IBM $77,651 $0 100%
Starbucks $77,573 $0 100%
Broadcom $76,583 $0 100%
Source: SEC 13 F filing, August 14, 2020.
invested $7.5 billion in Citigroup, Kuwait’s KIA injected $3 billion in Citigroup

and $2 billion in Merril Lynch, and Qatar’s QIA invested $3.5 billion in Barclays
(Pistor, 2009; Raymond, 2017; Saadi, 2009). Most notably, Gulf SWFs did not
promptly disinvest following incurred losses and short-term volatility but held their
positions at least until 2009 as the urgency of the global financial crisis was some-
what alleviated by government bail-out funds (Pistor, 2009).
While the 2007-08 global financial crisis and the coronavirus crisis are very differ-
ent in character, both have produced extraordinary volatility in financial markets.
Thereby, they provide a window to analyze SWFs’ institutional discipline and the
vulnerability of strategy, rules, and mandate to political influence. It underlines the
distinctiveness of the PIF’s strategy during the COVID-19 crisis not only in contrast
to other SWFs over the same period but across previous instances of SWF behavior
in times of market volatility. By doing so, it challenges the putative conceptualization
of SWFs as an ideal type of patient capital providers, who maintain their investments
even in the face of short-term volatility, given their mandate to generate returns
through an extended timeframe and low pressure to generate short-term profits
(Deeg & Hardie, 2016; Lerner & Ivashina, 2019; Thatcher & Vlandas, 2016).
Abundance in the age of scarcity: the PIF’s expansion and

international factors
So far, the analysis accentuates how the PIF revamp is associated with shifts in
regime structures and intra-elite politics characterized by a concentration of
Figure 1. Saudi Fiscal Trends (2013–2020).

Source: SAMA annual reports
political and economic power within the circles of the Saudi ruling family since the
rise of MBS. Can this turn in institutional design and investment initiatives be pri-
marily explained by factors linked to regime structure? What about international
factors? Authors like Aizenman and Glick (2008), Das et al. (2009) see sovereign
development funds in commodity-exporting countries like the Saudi PIF as mainly
driven by macroeconomic indicators. The focus is on sustained fiscal budget or
current account surpluses following a resource boom in addition to challenges of
economic diversification. While the PIF’s expansion appears coherent considering
Saudi Arabia’s need for greater economic diversification10, a cursory look at macro-
economic trends illustrates how the SWF’s revamp took place in an age of scarcity
characterized by falling oil prices, growing public debt, sustained budget deficits
and increasing demographic pressures.
In 2014 the oil market turned and sent Brent prices tumbling from $98.97 in 2014
to $41.96 in 2020 (EIA, 2021). This drop in oil prices directly affected the Saudi oil-
dependent state revenues, which declined twofold between 2013 and 2016 to reach
72% of their pre-oil shock level in 2020. In contrast to a sharp decline in revenues,
government expenditures decreased much more slowly. As a result, the Saudi govern-
ment has been experiencing sustained fiscal deficits since 2014 (Figure 1). The public
debt rose by 221% in 2015, 123% in 2016 and continued to grow between 40% and
21% until 2019 (Saudi Arabian Monetary Authority, 2017, 2020).
In addition, the last Saudi demographic survey (2016) exposes how of the 20.1
million Saudi nationals, 49% were under the age of 25, and 30% were under
15 years of age (Kingdom of Saudi Arabia, 2016). In 2016 the total sum of Saudi
nationals was more than eight times the size of any Gulf country (Gulf Research
Center, 2016). Consequently, the available sovereign wealth per citizen in 2017 was
$422 in Kuwait, $1,043 in Qatar and $1,085 in the UAE, while it stood at $42 per
Saudi citizen (Gross & Ghafar, 2019). The dual prospects of a growing number of
Saudis entering the labor market and a steady decline in resource revenues chal-
lenge the sustainability of the Saudi distributive state built mainly around large-
scale public employment, social transfers, and heavily subsidized public utilities.
For instance, in 2015, the government reported that salary and allowance expendi-
tures alone exceeded total oil income (Hertog, 2018). Macroeconomic trends
underscore the paradoxical disconnect between the Kingdom’s dire fiscal situation
and the PIF’s significant expansion since 2015.
The Kingdom’s deteriorating fiscal circumstances also directly affect the PIF
funding source highly dependent on oil income. Sovereign development funds like
the PIF often raise capital through bond issuance to support their investment pro-
gram (Schena & Chaturvedi, 2011). Rather than issuing bonds considering short-
falls in resources revenues, the PIF shows an increasing appetite for private debt.
The SWF opted to tap international banks to secure an $11 billion loan in 2018
and a $10 billion loan in 2019 (Abdellatif, 2019; Afanasieva, 2018). Then in March
2021, the PIF announced a $15 billion multicurrency revolving credit facility with
17 international banks (Saudi Press Agency, 2021c). Private loans allow the fund to
avoid the scrutiny and various constraints associated with disclosure and issuing
requirements of bonds but also illustrate a turn towards a more short-term
approach to sovereign wealth management.
Another common assumption is that countries with geographical and cultural
proximity, similar export profiles and exposed to similar external pressures will
adopt similar SWF types and behaviour either through a process of cross-national
emulation (e.g. Chwieroth 2014) or shared macroeconomic characteristics
(Aizenman & Glick, 2008; Das et al., 2009; Lee, 2007). Consistent with this diffu-
sion-based hypothesis (Chwieroth, 2014) Saudi Arabia, Bahrain and Abu Dhabi
have indeed established SWFs with a development mandate when confronted with
similar challenges, namely industrial upgrading or economic diversification.
However, Abu Dhabi and Bahrain’s sovereign development funds were launched in
2002 and 2006, coinciding with the oil boom of the early 2000s. Saudi Arabia
became the last Gulf country to set up an SWF with a development mandate in
2015, a period counterintuitively characterized by a dramatic fall in state revenues
and considerable fiscal deficits.
Moreover, one finds that Saudi Arabia’s SWF varies more than in context of
establishment but also in terms of strategic orientation, as previously demonstrated
by the discrepancy between the PIF’s speculative approach and Mubadala’s more
patient response to the COVID-19 shock. In addition, Mubadala carries the reputa-
tion of a reliable multi-year investor and the Gulf’s most professional state invest-
ment vehicle; the fund was Global SWF’s 2021 fund of year and also takes part in
the IFSWF’s self-assessment and transparency initiatives (Global SWF, 2022). Can
factors linked to distinct regime dynamics explain this variation between the two
Gulf SWFs? Despite sharing many similarities in terms of macroeconomic features,
most notably dependence on oil revenues and exposure to external pressures like
commodity cycles, the UAE has the most diversified economy in the GCC, and
Abu Dhabi has most of the UAE’s oil wealth (Gross & Ghafar, 2019). Besides, the
total sum of UAE nationals (including Abu Dhabi and other emirates) of 950 368
in 2016 contrasts the 20.1 million Saudi nationals (Gulf Research Center, 2016;
Kingdom of Saudi Arabia, 2016). As a high-rent country, the emirate is thus in a
much stronger macroeconomic position than a low-rent Saudi Arabia. Therefore,
under the assumption of SWFs as driven by macro-level indicators, Mubadala,
rather than the PIF, emerges as the SWF in a better position to implement a more
aggressive and riskier investment policy based on higher sovereign wealth per cap-
ita and a superior macroeconomic position.
At the socio-political level, Saudi Arabia and Abu Dhabi share similarities in con-
centration of authority, state autonomy, and power distribution in state-business rela-
tions. Like MBS, Muhammad bin Zayed Al-Nahyan (MBZ), crown prince and de
facto ruler of Abu Dhabi and the UAE since 2004, side-lined previously influential
officials or senior ruling elite members and concentrated power in the hands of
trusted relatives or within a small circle of technocrats. For instance, Khaldun Al-
Mubarak, known as MBZ’s closest associate, is entrusted with various significant eco-
nomic and political portfolios but is also the renowned managing director of
Mubadala (Davidson, 2021). Much like the PIF and MBS, Mubadala is chaired by
MBZ and was established to drive Abu Dhabi’s diversification efforts towards tech-
nology-focused activities, mainly in aerospace, electronics and defense. While major
institutions are under MBZ’s grasp or his inner circle, the crown prince also consoli-
dated his authority over the business elite mainly through anti-corruption campaigns.
In addition, institutions of business representation enjoy a low degree of autonomy
and limited political strength (Braunstein, 2019; Davidson, 2021). The design and
working logic underpinning SWFs is a multi-faceted and complex issue. Nonetheless,
against a backdrop of counterintuitive macroeconomic trends and in contrast with
an SWF embedded in comparable socio-political dynamics, the PIF’s revamp and
shift towards a more aggressive and wide-ranging investment strategy appears as fun-
damentally driven by distinct regime dynamics following the 2015 regime change.
Conclusion
Beyond the logic of SWFs as outcomes of macro-level trends, the political dimen-
sion underlying the PIF’s reconfiguration is crucial to understanding SWF develop-
ment in Saudi Arabia. More specifically, the article demonstrates how the
concentration of royal authority and power politics within the family following the
accession of King Salman and the rise of MBS drove the shift in the PIF’s post-
2015 institutional design and investment initiatives. The outcome was a shift from
scattered and uncoordinated investment patterns associated with interagency feuds
and the influence of competing senior decision-makers to a personalized and highly
interventionist strategy driven by a tightly knit group of regime insiders evolving
around the crown prince.
The connection between PIF choices, elite politics, and reshuffle at the top-level
of the Saudi state apparatus following the rise of MBS illustrate that despite theor-
etical efforts to depoliticize SWF design and use, the personal ambition of political
agents and their political network carry weight in choices relating to sovereign
wealth management. In line with patterns in the Kingdom’s state formation since
the 1950s (Hertog, 2010b; Yizraeli, 1998), institutional initiatives are often tokens
of authority in an intra-elite power game as much as attempts at modernizing or
reforming the state. The PIF is yet another reminder of how competing interests
and coalitions between senior royals and technocrats can shape the trajectory of
the Saudi state at historical junctures.
These findings have implications for research on drivers of sovereign invest-
ments in IPE more broadly. While Thatcher and Vlandas (2016) underline the
growing role of SWFs as allocators of long term capital, Lerner and Ivashina
(2019) point to SWFs as pools of much-needed patient capital in the face of

pressing issues such as climate change, global health and decaying infrastructure.
Nonetheless, the present analysis underlines that this portrait of SWFs as pure
cases of risk-averse and long-term capital providers regardless of mandates and
political contexts is painted with too broad of a brush. Instead, the findings illus-
trate how investment patterns may be driven by the ambition to bolster national
champions or further political and strategic goals, either through acquiring con-
trolling stakes in targeted companies or even speculative and short-term oriented
blitz on markets. Faced with a shift in the political balance of power, the Saudi
leadership consciously and conspicuously deployed the SWF locally and globally
to legitimize and sustain existing structures of political authority rather than
merely seeking profit-maximization through a long-term horizon. Decisions
regarding SWFs are not fixed in an apolitical vacuum but are instead enmeshed
in specific social, economic and political contexts.
This analysis touches upon crucial theoretical and empirical issues in IPE. The
growth of SWFs and their increasingly heterogenous and aggressive market posi-
tions, either domestically or across the global financial market as exemplified by the
PIF, stresses how restrictive a clear state-versus-market dichotomy is. The process of
state financialization and SWFs reassert state authority and thus signal that states
participate in global finance beyond a mere regulative role (Babic et al., 2020;
Helleiner & Lundblad, 2008; Schwan et al., 2021). In this sense, including political
agency and relational structure underlying the rise of SWFs as key market actors in
our analysis can accentuate the political and strategic objectives of state investment
funds, whether it be at home or over the global financial markets. The quantitative
SWF analyses can be complemented by closer, qualitative and case-oriented research
in order to heighten the political dimension behind the broader expansion of trans-
national state capital. With numerous established or planned funds in countries as
diverse as Turkey, Cape Verde, Switzerland or Uruguay, recognizing the interplay of
domestic politics and sovereign wealth management is crucial to address the oppor-
tunities and challenges underlying the governments’ leverage of state finance institu-
tions. The fast-growing interest in SWFs in a wide array of socio-political contexts
calls attention to the need for scholars and practitioners to further engage with the
frontiers of SWFs’ design and use.
Acknowledgements
The author would like to thank Ewan Stein, Charlotte Rommerskirchen, Lucy Abbott and the
anonymous referees for helpful and insightful comments on earlier versions of this article.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. SAMA does not provide any currency breakdown of foreign exchange reserves.
Nevertheless, in 2008, SAMA was believed to hold 85% of its foreign exchange reserve in
US$(Bazoobandi, 2013).
2. Smith Diwan (2009) judged that 50 to 60 government agencies were involved in foreign
investment activities.
3. Data on the Saudi bank sector’s market share as of Q1-2020 (Aljazira Capital, 2020b).
4. Data on shareholders from Tadawul as of January 2022.
5. Data from Tadawul as of January 2022.
6. Data on directors and shareholders from Tadawul, Capital IQ, publicly available data
from LinkedIn and Hanieh’s (2018) extensive work on Gulf conglomerates.
7. FDI net inflows data from the World Bank as of January 15, 2021, https://data.
worldbank.org/indicator/BX.KLT.DINV.CD.WD?end=2019&locations=SA&start=2008&
view=chart
8. The global CEOs and finance officials who dubbed the event include Stephen
Schwarzman (CEO of Blackstone), Christine Lagarde (then director of the IMF), Jamie
Dimon (CEO of JPMorgan Chase), AOL’s founder Steve Case, Siemens CEO Joe Kaeser,
Blackrock and Uber CEOs Larry Fink and Dara Khosrowshahi, Virgin CEO Richard
Branson, and Bill Ford of Ford Motor (Alkhalisi, 2018; BBC, 2018; Stanley-Becker, 2018).
9. Statement from email communications between PIF officials and Abu Dhabi’s daily, The
National News (Kamel, 2020).
10. From 2000 to 2019, oil income averaged 81,4% of total state revenues (SAMA
annual reports).
Notes on contributor
Alexis Montambault Trudelle is a doctoral candidate in Politics and International Relations at the
University of Edinburgh.
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The Public Investment Fund and Salman’s

Alexis Montambault Trudelle

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The Public Investment Fund and Salman’s state: the

CONTACT Alexis Montambault Trudelle a.montambault-trudelle@sms.ed.ac.uk

post-2015 political landscape. In its historical-institutional approach, this article

use grounded in macroeconomic indicators. Finally, the last section offers

Internal political dynamics and sovereign wealth funds

The centralization of royal authority in the post-2015 Saudi

transition to third-generation leadership as Salman is set to be the last second-gen-

Political interests, regime change, and PIF activities

The post-2015 PIF: form follows family

The post-2015 PIF in Saudi Arabia’s economy

(McPherson-Smith, 2021). Furthermore, the closed joint-stock companies charged

From buying bonds to buying the dip

aggregated the Kingdom’s foreign investment activity under a single umbrella as

instead of a medium to long-term perspective underpinning the PIF’s stated goal of

Table 1. Variation in PIF US-Listed Holdings from Q1 to Q2 2020.

invested $7.5 billion in Citigroup, Kuwait’s KIA injected $3 billion in Citigroup

Abundance in the age of scarcity: the PIF’s expansion and

Figure 1. Saudi Fiscal Trends (2013–2020).

(2019) point to SWFs as pools of much-needed patient capital in the face of

Investment, S. (2020). Who We Are. Sanabil Investment. https://www.sanabil.com/en/whoweare/

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