Behind the startling news this week that the PGA Tour wants to merge with a rival Saudi-backed upstart league called LIV Golf is behind the multi-billion dollar organization to make it happen: Saudi Arabia. of sovereign wealth funds.
The fund has long been a household name in the financial world, but the deal, which took golfers by surprise, shed some light on what has been described as one of the world’s most opaque businesses.
Here’s what we know about the Saudi fund.
What is the Saudi Government Fund?
Also known as the Saudi Wealth Fund, public investment fundor PIF, is an investment pool that manages over $700 billion in government funds.
They use those funds to invest in domestic and foreign companies, real estate and other businesses, ostensibly to generate profits for the benefit of the Saudi economy.
Founded in 1971 by royal decree, the company is headquartered in Riyadh, Saudi Arabia, but has offices around the world. The PIF has grown rapidly in recent years, funding ambitious tourism and commercial ventures dubbed ‘Gigaprojects’.
How do Saudi funds rank globally?
It’s not the biggest in the world. It must be Norwegian. Sovereign Wealth Fund Institutewhich currently manages $1.4 trillion.
Who runs the Saudi fund?
The public investment fund is headed by Gov. Yasir Al Rumayyan, a former banker and chairman of state oil company Saudi Aramco. He is also the organizer of the annual ‘Davos Conference in the Desert’ in Riyadh which attracts thousands of attendees.
But the real power behind the purse strings, analysts say, is Saudi Arabia’s de facto leader, Crown Prince Mohammed bin Salman, who chairs the public investment fund board.
Prince Mohammed has laid the sovereign fund as the cornerstone of his ‘Vision 2030’ economic growth plan aimed at moving Saudi Arabia away from its dependence on oil resources and expanding the economy into technology, healthcare and other sectors. .
The 37-year-old crown prince also set a goal of increasing the assets of the Public Investment Fund to $3 trillion by 2030.
What are the fund’s investments?
Under Prince Mohammed’s reign, the fund has invested in a range of international companies, including Uber, private equity firm Blackstone, Japanese conglomerate SoftBank, English Premier League football team and sports franchises such as Newcastle United. .
It also supports a futuristic city in the desert of Saudi Arabia. Neomannounced a new airline to purchase 72 Boeing Dreamliners, and the fund’s website says it will commit to a “green” strategy.
The Public Investment Fund announced Tuesday that LIV Golf will merge with European golf circuits PGA Tour and DP World Tour in hopes of creating a global giant in the sport.
How was the reaction?
The word “shock” is thrown around a lot.
First, some key figures were removed from confidential negotiations. Golf fans never expected it to come.
But many Saudi officials were ecstatic, thinking it was a story that countered the tide of negative press. “I’m not going to lie. This is a moment that many of us enjoy,” Saudi businessman and royal family member Prince Talal Al-Faisal said in an interview.
When the Sovereign Wealth Fund-funded LIV Tour launches in 2021, it marks a departure from golf’s annoying traditionalism and quickly divides the world of men’s professional golf.
It was a breakaway league and was seen as a threat to the PGA Tour. It lured golf stars like Phil Mickelson (reportedly worth $200 million) to frontmen. The PGA Tour tried to catch up by increasing prize money.
Big stars like Tiger Woods have spoken harshly about the new league and Greg Norman, who has become the western face of LIV as commissioner. LIV plucked some of the most widely known players from his established PGA Tour, and the PGA kicked them out.
As such, the golf world took the new partnership with no small amount of surprise. Experts say the deal, if successful, could change the game of golf as we know it.
How did the deal come about?
The secret meeting was perhaps sweetened by the promised riches.
Al Rumayyan, an aide to Prince Mohammed, has spearheaded talks over the past month and a half with PGA Tour commissioner Jay Monaghan.
“I know people will call me a hypocrite,” Monahan said after the announcement. “But things change.”
But what about resentment and controversy?
The new league, the sovereign wealth fund, the Saudi government and the royal family have all been tainted by scandals at some point.
The birth of LIV sparked a lawsuit with the PGA Tour, the latter of which came under intense scrutiny from DOJ antitrust agents investigating whether the Tour’s efforts to thwart LIV had damaged the golf job market. .
Saudi investment funds have raised eyebrows by entrusting billions of dollars to former Trump administration officials, including an investment firm run by Jared Kushner, the son-in-law of former President Donald J. Trump. The other is run by former Treasury Secretary Steven Mnuchin.
Invested in Russian infrastructure. Turkish security officials also say he is accused of being involved in the purchase of a plane to transport the murderer of Saudi dissident author Jamal Khashoggi to Turkey, where he was killed and his body was found. It is said to have been cut into pieces. A US intelligence report later announced that the Saudi crown prince had authorized the assassination.
Saudi Arabia has also played a proxy role in devastating conflicts in places like Yemen, where the Saudi-led coalition has been fighting Iran-backed Houthi rebels since 2015.
what happened now?
Most of the terms of the deal have not been disclosed, and the deal may not go through under intense scrutiny from international regulators and the PGA Tour board, which requires approval.
But under the deal announced Tuesday, bitter lawsuits between former rivals are expected to disappear like golf balls in tall grass. The fate of the antitrust investigation is less clear.
Under the plan, Al Rumayyan will lead the new for-profit board of directors. (He previously served on the boards of Uber and SoftBank Group.)
Late last year, in an interview with Saudi Arabia’s podcast Socrates, Al Rumayyan professed his love of golf, stating that “golf is a really fun sport and one of the best,” and the crown prince against public investment. celebrated the goals of fund.
“We have a complete plan for 2030, first how we get to 1 trillion and then how we get to 2-3 trillion,” he said. Stated. “Prince Claims $3 Trillion.”
Christian Coates Ulrichsen, a Middle East researcher at Rice University’s Baker Institute of Public Policy, said the deal was “very strategic” for Prince Mohammed. He said the plan “reaches beyond the Belt and Road into parts of Central America and is seriously engaged with them to tell the story of a changing Saudi Arabia.”
What’s your message? he added. “This is not the Saudi Arabia you thought you knew based on 911, Khashoggi and Yemen.”
