The Strategist

Saudi sovereign fund to borrow $10B to invest in stock market

05/18/2020 - 02:27

The sovereign fund of Saudi Arabia intends to borrow about $ 10 billion in order to take advantage of the crisis in the markets and buy cheaper shares of major world companies. The Qatari Reserve Fund is following a similar plan.

Saudi Arabia's Public Investment Fund (PIF) intends to borrow about $ 10 billion from investment banks, Bloomberg wrote, citing sources. According to them, the Saudi fund is in talks, and is ready to provide its investments in the Vision Fund investment fund secured by a loan, which was launched by Head of SoftBank Masayoshi Son. The volume of this fund is a record $ 100 billion.

The Saudi fund needs liquidity to acquire shares in the world's largest companies, Bloomberg sources say. Saudis have been building up their stakes since the outbreak of the coronavirus pandemic and, as it turned out, already own part of Facebook, Boeing and Citigroup, Bloomberg claims. This strategy was confirmed by fund manager Yasir Al-Rumayyan in April: according to him, the fund is exploring all the opportunities that economic shocks opened up due to the crisis, Bloomberg reports. Head of the fund then predicted that the fund expects to see "a lot of opportunities," and mentioned airlines, as well as energy and entertainment companies, including the agency.

Bloomberg sources say PIF has decided to expand its global investment portfolio. The list of investment acquisitions includes stakes in the cruise operator Carnival Corp. and hotel chains Marriott International Inc., as well as energy companies Suncor Energy and Canadian Natural Resources, the agency writes.

The Saudi fund is the largest investor in the Vision Fund; it invested $ 45 billion in the Masayoshi Son project and acquired shares in Uber, WeWork and Oyo Hotels hotel chain. The Vision Fund is showing record losses just because of Uber and WeWork, but banks can still be interested in PIF's offer, Bloomberg explains: they can earn on fees related to structured finance.

The sovereign fund of another state in the region, Qatar, follows the same strategy. The fall in oil prices forced the sovereign funds of both countries to simultaneously seek new sources of liquidity, Bloomberg said. The Qatari fund is trying to raise $ 7.6 billion, the agency claims.