Saudi Arabia's massive wealth fund sees $8 billion writedown in megaprojects

Saudi Arabia's mammoth sovereign wealthiness money saw a large diminution successful investments successful its alleged "gigaprojects," amounting to an $8 cardinal write-down astatine the extremity of 2024 — contempt assets nether absorption reaching astir $1 trillion, according to its yearly report.

Gigaproject investments declined by 12.4% to 211 cardinal Saudi riyal ($56.2 billion). Meanwhile, assets overseen by the PIF climbed 19% from the extremity of 2023 to astir $913 billion, making it 1 of the largest and fastest-growing sovereign wealthiness funds connected the planet. The gigaprojects, which see the futuristic $500 cardinal Neom development, constituted 6% of the PIF's assets successful 2024, down from 8% the twelvemonth prior.

The writedown comes amid little planetary lipid prices and a increasing fiscal shortage for the Saudi kingdom, whose system depends heavy connected lipid contempt efforts to diversify it and important non-oil gross growth.

The PIF's annualized returns since 2017 dropped to 7.2% from 8.7% the erstwhile year. The money — which has important holdings successful a scope of blue-chip companies similar Uber and Tesla, and owns large sports franchises similar LIV Golf and British shot nine Newcastle United — was besides seen broadening its backing base, raising astir $10 cardinal successful nationalist indebtedness and $7 cardinal privately.

International investments fell to 17% of the portfolio, down from 20% the twelvemonth anterior arsenic the money honed its absorption connected home investments.

Part of the crushed down the PIF's important leap successful AUM is acknowledgment to much of Saudi authorities lipid elephantine Aramco being allocated to the fund. But analysts enactment that if crude prices proceed to fall, arsenic immoderate manufacture forecasters expect volition beryllium the case, the percent of gross that the Saudi authorities and PIF volition beryllium capable to deduce from those lipid investments is apt to alteration successful tow.

Lower lipid prices, and reduced Aramco dividends owed to little lipid request projections, are expected to bounds PIF's concern funds. In the meantime, it is expected to summation its investments successful high-growth areas similar artificial intelligence, analysts say.

Neom, a caller portion successful occidental Saudi Arabia being built from scratch that is astir the size of Massachusetts, is portion of Vision 2030, which aims to diversify the Saudi system distant from lipid revenues and make caller jobs and industries for its burgeoning young population.

The brainchild of Saudi Crown Prince Mohammed bin Salman, Neom is slated to incorporate a fig of futuristic cities and developments that the kingdom expects volition bring successful millions of caller residents and revolutionize surviving and exertion successful the country. However, fund overruns, operational complications and planetary lipid marketplace conditions person forced the kingdom to standard back oregon wholly shelve immoderate of those projects, sources who person worked connected Neom person told CNBC.

The outgo of Neom arsenic a full has been estimated to outgo anyplace betwixt $500 cardinal and $1.5 trillion. After galore years of seemingly unlimited spending, 2024 began to spot an abrupt displacement as the Saudi fund shortage grew and the terms of a tube of lipid fell good beneath what the kingdom needs to equilibrium its budget.