Saudi Arabia's PIF to anchor Brookfield's $2bn fund to boost investment

Saudi Arabia's Public Investment Fund has signed a preliminary agreement to anchor Brookfield Asset Management's new $2 billion private equity fund, which aims to boost investment into the Arab world's biggest economy and the wider region.

Half of the investment of Brookfield Middle East Partners – the new fund – will be allocated in the kingdom and international companies looking to expand in the local market, the Riyadh-based PIF, with $930 billion of assets under management, said in a statement on Wednesday.

The fund will target buyouts, structured solutions and other investment opportunities within key sectors such as industrials, business and consumer services, technology and health care.

The move will also allow Canada-based Brookfield, which has about $1 trillion in assets under management, to tap into other Middle East countries, where investors are increasingly turning their attention to especially high-potential markets amid economic and stock market strength. The agreement is still subject to complying with certain regulatory and internal approvals, it said.

The partnership aims to support further economic development in Saudi Arabia, positioning it as a hub for global investment, “demonstrat[ing] our continued efforts to foster international partnerships that enhance local markets”, Yazeed Al Humied, deputy governor and head of Middle East and North Africa investments at the PIF, said in the statement.

It also represents “a step toward achieving the PIF’s vision of attracting global capital and expertise to the region, while facilitating knowledge transfer and capacity-building within Saudi Arabia”, he added.

The PIF's move is in line with its plans to cut its portfolio of foreign assets by a third and focus more on domestic markets as it aims to establish the kingdom as the global hub of artificial intelligence, its governor, Yasir Al Rumayyan, said at the Future Investment Initiative conference in Riyadh on Tuesday.

He said the initial investment days are behind the PIF, when global investors sought its funds to invest outside the kingdom, as trends have changed to co-investments in the kingdom and as the PIF has created many joint ventures with its international partners.

Over the past eight or nine years, the projects the sovereign fund has invested in have hit the operation and commercial stage. Now there is a discernible difference in the perception of the kingdom as an economy and a destination of investment from how it was viewed in 2015 and before.

The PIF established 92 new companies, including Neom, Red Sea Development and Aalat, “big investors in new sectors that were not in existence in Saudi Arabia”, Mr Al Rumayyan added.

In August, the PIF said its assets under management (AUMs) jumped 29 per cent to 2.87 trillion Saudi riyals ($765 billion) in 2023 as it solidified its Saudi holdings and diversified its international portfolio of assets.

Meanwhile, Saudi Arabia, which is diversifying its economy away from oil, continues to maintain its appeal as a foreign direct investment destination, despite a sharp increase in geopolitical uncertainty in the region, which underpins the fact that Vision 2030 programme is working.

The kingdom's non-oil economy has grown consistently between 4 per cent to 5 per cent annually since 2017, and 540 companies have committed to establish their regional headquarters in the country, ahead of Riyadh's target of 500 by 2030.

“Saudi Arabia is core to the region’s economic transformation,” said Bruce Flatt, chief executive of Brookfield Asset Management.

Toronto-based Brookfield, which is listed on the New York Stock Exchange, has more than 2,000 investments across more than 30 countries, and is focused on helping create long-term and sustainable wealth for businesses and individuals.

The firm has $194 billion of AUMs in Europe and the Middle East, second only to North America's $616 billion and ahead of the Asia-Pacific's $131 billion and South America's $54 billion, according to its website.

Last month, Brookfield raised $2.4 billion for the Catalytic Transition Fund, which was launched at last year's Cop28 climate conference, and is positioned to invest in clean energy projects in emerging markets.