Saudi Arabia’s Sovereign Wealth Fund Reports $16B Loss From Crash in Investment Portfolio

Saudi Arabia’s Sovereign Wealth Fund Reports $16B Loss From Crash in Investment Portfolio

UTC by Tolu Ajiboye · 3 min read
Saudi Arabia’s Sovereign Wealth Fund Reports $16B Loss From Crash in Investment Portfolio
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Saudi Arabia’s investment fund has reported a heavy loss worth billions of dollars from economic factors that reduced its many investments.

The sovereign wealth fund in Saudi Arabia announced that it took a comprehensive loss in 2022 worth $15.6 billion. The loss came following an economic decline that caused a significant plunge in the value of the fund’s investments in SoftBank Group’s SoftBank Vision Fund.

Last month, Saudi Arabia announced that its Public Investment Fund (PIF) lost $11 billion following unprofitable investments last year. Although the fund increased its global spending allegedly to secure more investments, a crash in the prices of stocks and bonds affected the PIF. Interestingly, the recorded loss was way off the $19 billion profit from 2021 following the market recovery that succeeded the coronavirus pandemic.

In addition to the $11 billion, PIF announced further losses in taxes, expenses, and operational costs, according to a recent annual financial report.

The Saudi fund has recently been pumping funds into a lot of investments it hopes would bring profit rather than unfortunate loss. In 2018, American EV maker Lucid Motors announced a $1bn+ agreement with the PIF via a special-purpose vehicle wholly owned by the fund.

In May, Lucid Group also announced it would use a stock offering to raise $3 billion, with nearly two-thirds of the funds coming from the PIF. The Saudi fund owns over 60% of Lucid and agreed to spend $1.8 billion on 265.7 million shares of Lucid via a private placement.

In addition to EV endeavors, Saudi’s PIF is also looking into the video game industry. Through its subsidiary, Savvy Games Group, the PIF plans to publish games and turn the country’s capital of Riyadh into a vibrant gaming hub. So far, PIF has acquired billion-dollar stakes in gaming giants like Activision Blizzard Inc., Tencent Holdings Ltd., and Nintendo Co.

Singapore’s Investment Arm Also Follows Saudi Loss

The government-owned Temasek Holdings Pte in Singapore recently reported its worst return in 7 years. Like the PIF, Temasek is suffering the ill effects of global recession risks, geopolitical conflicts, especially with Russia and Ukraine, high interest rates, and the general economic downturn worldwide.

Temasek said the net value of its investments fell to S$382 billion (US$285 billion) in the financial year to March compared to a record S$403 billion recorded the previous year. The company also announced a 5.07% fall in total shareholder returns. This is a continuous year-over-year (YoY) reduction compared to a 5.8% increase in 2022, and 2021’s 24.5% rise.

Temasek was also affected by the FTX collapse and eventually wrote down its investment in the company worth $275 million. The investment company had invested $210 million in FTX International, and another $65 million in FTX US. 

According to Temasek’s chief investment officer Rohit Sipahimalani, economic factors still need work. Sipahimalani said:

“The global economy is still quite fragile. Geopolitical tensions are high, showing no signs of easing. Inflation is elevated in most developed markets…we do believe that to get inflation under control, we probably will need to see a recession.”

As several countries continue to fight inflation using interest rate hikes and other similar macroeconomic decisions, outfits like Temasek and PIF may record more losses until the risks abate.

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