Your Excellency, thank you very much for this interview. Undoubtedly, the first question in light of the current security situation is your assessment of the implications of this war on the Saudi economy, as well as on the fund's strategy.
Naturally, the impact of the war is not limited to the Saudi economy or the fund's strategy alone, but extends to the global economy as a whole. Oil prices have increased, shipping and insurance costs increased, food prices have increased as a significant portion of chemical fertilizers passes through Saudi Arabia and other Gulf countries. In addition, helium gas is facing difficulties reaching Taiwan, leading to delays in semiconductor chip manufacturing or increased costs. As for the fund, our strategy is long-term rather than short-term. It spans the next 5 years and represents a continuation and evolution of previous strategies since the fund's establishment in 1971 through the transformation phases in 2015 and 2017, followed by the 2021 to 2025 strategy, and now the current strategy for the period from 2026 to 2030. We will return to the fund's new strategy or its next phase shortly.
But specifically regarding the war, Your Excellency, were there any initial commitments to external deals that are now being reconsidered due to the impact of the war?
Some deals and investments are being reviewed, whether due to the war or for reasons related to economic feasibility. We continuously reassess our priorities and existing investments. I cannot say that we cancel a specific investment in favor of another as this process is inherently dynamic both in times of war and under normal circumstances. However, it is certain that the presence of war places greater pressure on the need to reposition certain priorities.
And where do the priorities lie?
Priorities are naturally defined based on national needs and aligned with the requirements of the national economy, which constitutes a key priority for us. We do not operate solely as financial investors, rather our role extends beyond that. Since the fund's establishment, the objective has not been limited to generating financial returns. While returns are an important part of the fund's goals, they are not the only objective. Financial returns and developmental objectives for the fund.
Based on that, how do you measure performance? And what KPIs do you rely on to assess what has been achieved for the Saudi economy?
KPIs are significant in light of what has been achieved. To answer this question, it is important to review the fund's stages of development since its establishment in 1971. In its early years, the fund focused on developing the local economy, particularly in the financial sector, the petrochemical sector, and infrastructure projects such as railways, playing a clear role in driving development. In 2015, a major transformation took place. Developmental goals were no longer the sole objective, but became part of a broader framework that also includes economic feasibility. Limiting objectives to development alone would mean overlooking the economic viability of projects. In 2015, following the transfer of the fund from the Ministry of Finance to the oversight of the Council of Economic and Development Affairs, work began on redefining its strategy for the 2018 to 2020 period as part of this transformation phase. During this transformation period, we established several companies and major projects among the largest globally were launched, including NEOM, the Red Sea project, and Qiddiya. The fund also strengthened its partnerships locally and internationally, contributed to the creation of significant job opportunities, and enhanced collaboration with the private sector. At the start of 2021, the fund entered the third phase of its strategic development for the 2021 to 2025 period, marking a stage of expansion and growth while building on the achievements of previous phases. Several national companies were launched, including ROSHN, Qiddiya, and Savvy, while existing companies such as ACWA Power, Bahri, and Ma'aden were further enabled and developed with the fund playing a key role in expanding their operations and strengthening their impact. The current strategy, covering the period from 2026 to 2030, builds on this trajectory and focuses on transforming 13 strategic sectors into six integrated economic ecosystems.
On what basis were these ecosystems selected?
To answer this question logically, it is important to explain how the fund's investment structure has evolved. In the early phase of its strategy, the approach was based on a geographic allocation of investment objectives. The fund had six investment portfolios, two dedicated to international investments, two to domestic investments, and two to local real estate investments, including a dedicated portfolio for mega projects. We have now moved to implementing three main portfolios, the Vision portfolio, the Strategic Investment portfolio, and the Financial Investment portfolio. Each of these portfolios has distinct investment objectives, although all are ultimately aimed at delivering strong financial returns. The Vision portfolio focuses on enhancing integration across priority strategic sectors for the Saudi economy and the Public Investment Fund. It also aims to maximize value for the fund's companies and support local economic growth through the development of integrated economic ecosystems numbering around six. The second portfolio, which is the Strategic Investment portfolio, focuses on managing and maximizing returns from strategic assets while also increasing the economic impact of the fund's companies. The third portfolio, the Financial Investment portfolio, is primarily focused on generating financial returns both domestically and internationally.
Since the transformation, the fund has achieved average returns of around 7%. Are you now targeting higher returns than that?
Overall, yes. Let me provide a historical overview of the fund's achievements. The fund's AUM, or assets under management, has grown from approximately 500 billion Saudi riyal in 2015 to more than 3 trillion riyal. Total shareholder returns have averaged around 7% annually. Approximately 750 billion Saudi riyals have been invested domestically, contributing an estimated 910 billion riyal to the GDP. Most importantly, local content has reached around 590 billion Saudi riyal. These indicators contribute to enhancing what is known as economic complexity as the focus is not solely on GDP growth, but also on the diversification and sophistication of the economy with local content being a key pillar of this concept. In addition, a number of global asset managers and investment funds have established regional headquarters within the kingdom. Also, from 2021 to 2025, foreign investments exceeding 75 billion riyals were brought into the Saudi market with support from the fund.
Is foreign investor appetite today affected by the war?
Certainly, investor appetite is affected across the board, not just among foreign investors. Even European investors within Europe see shifts in sentiment, as do investors in Asia, whether in China, South Korea, Japan, or Indonesia. Everyone is impacted. That is because the war is not taking place in a remote region, but in one of the world's most critical areas for supplying essential commodities, including oil, gas, and their derivatives, as well as industrial fertilizers. As a result, it is only natural that the situation is having a clear impact.
Your Excellency, does the new strategy include any changes in the scale of investments to be deployed domestically compared to other investments?
In fact, this approach has been in place from the outset and is something we continue to build on. It has been reflected in the restructuring of investment portfolios into three main categories, the Vision portfolio, the Strategic Investments portfolio, and the Financial Investments portfolio. Our primary focus remains on the Saudi economy by strengthening local investments in a way that delivers strong financial and commercial returns.
Is there a target ratio for the allocation of domestic investments?
From the outset, we announced that approximately 80% of investments would be domestic compared to 20% allocated to international investments. Historically, the fund's focus on domestic investment was around 98.5% before international investments increased to approximately 30%. However, this does not mean reducing the absolute value of investments. Amounts may continue to increase even if the percentage declines as assets under management is expected to grow in the coming years. Therefore, even with a lower percentage, the total value of investments can still rise.
Your Excellency, over the past five or six years, we have seen some significant exits from the local market, particularly in the stock market. Most notably, the full exit from SABIC, as well as a reduction in your stake in STC. Could we see similar exits going forward?
