Saudi Sovereign Wealth Fund Cuts Overseas Investments by One Third, Economic Transformation Faces Setbacks!

Saudi Arabia's sovereign wealth fund plans to reduce its overseas investments by about a third, the fund's president said on Tuesday at a conference in Riyadh. The move is an effort to support the Saudi economy to finance its transition away from oil dependence. Yasir Al-Rumayyan, president of the Public Investment Fund, told a panel of business, technology and finance leaders that the sovereign wealth fund would reduce the proportion of international investments from 30 per cent to 18-20 per cent of total investments.

Leaders from the world of business, technology and finance are gathering in the Saudi capital for the annual Future Investment Initiative (FII) summit, giving attendees the opportunity to network with some of the kingdom's largest companies and their $925 billion sovereign wealth fund.

This year's event will also test investor appetite for Saudi Arabia's economic transformation plans against the backdrop of a potentially widening conflict in the Middle East. Crown Prince Mohammed bin Salman is working to steer the Saudi economy away from its dependence on oil, and the sovereign wealth fund is a key tool to achieve that goal. The fund has invested hundreds of billions of dollars to develop new industries to create more sustainable revenue streams.

However, the fund has had to scale back some of its flagship "gigabit projects" due to rising costs. Rumayan noted at the conference that the fund's investment strategy has shifted and now favors joint ventures with international and local companies.

"We are seeing a shift from just wanting us to invest or use our capital to invest to co-investing," he stresses.

Saudi Arabia's investment minister Khalid al-Falih said at the conference on Tuesday that the number of foreign companies now setting up regional headquarters in Saudi Arabia has reached 540, exceeding the target of 500 set for 2030.

One example is Mizuho Bank, whose CEO Masahiko Kato announced: "We plan to establish a regional headquarters in KAFD in Riyadh."

Still, oil remains at the heart of the Saudi economy, and Energy Minister Prince Abdulaziz bin Salman said at the same event that the kingdom was committed to maintaining crude production capacity at 12.3 million barrels per day.

Other speakers on Tuesday included Stephen Banchel, CEO of Moderna, Ruth Porat, president and CIO of Alphabet, and ceos of several major banks, including Citi, Goldman Sachs and Morgan Stanley.

The development of artificial intelligence, the upcoming US presidential election and the outlook for the economic outlook dominated discussions, while conflicts in the region were rarely mentioned.

Jeffrey Sachs, an economist at Columbia University, criticized both American and Israeli policies in a speech. "We don't need artificial intelligence to solve the problem of war, we need human intelligence to end the conflict," he stressed. His remarks drew applause from the audience.

Sachs said the actions of Israel and the United States stand in the way of an independent Palestinian state. Discussing the wars in Gaza and Lebanon and fears of a widening regional conflict, he asserted: "There can be no peace in the region until there is a Palestinian state."

Elon Musk joined the conference via video link and weighed in on the shrinking population, the need for AI to pursue truth, and the timing of sending a spacecraft to Mars. He proposes that some AI is being trained to conform to political correctness, while others are being built around what he sees as an "awakened, nihilistic philosophy." Musk has predicted that the number of humanoid robots could reach billions by 2040, with prices ranging from $20,000 to $25,000. He further said that this technological advance could double Tesla's market value.

Musk also mentioned that "Robotaxis will make Tesla worth $5 trillion, and Optimus Prime robots could make it worth $25 trillion." Optimus Prime Robot is a humanoid robot project being developed by Tesla.

As the U.S. presidential election approaches with just one week to go, participants were asked who is more likely to win the election. Citadel CEO Ken Griffin said the market widely expects Donald Trump to defeat Democratic Vice President Kamala Harris on Nov. 5, but the outcome of the election remains uncertain.

Steve Schwarzman, the chief executive of the Blackstone Group, was initially reluctant to comment on the election, but then said Trump had a deeper understanding of the duties of the presidency than he did in 2016.

Optimism about the global economy was also reflected at the conference, with bank chief executives predicting an increase in corporate dealmaking next year. Ted Pick, CEO of Morgan Stanley, noted during a separate panel discussion that the increase in activity will become a global phenomenon as larger companies go public. Goldman Sachs CEO David Solomon also expects stronger economic activity next year.

Mark Rowan, CEO of Apollo Global Management, believes that Trump's victory will spur merger and acquisition activity, which has been suppressed by the current administration, and promote investment liberalization. Several executives at the conference also noted that while central banks are poised to cut interest rates further, inflation is having a more profound impact on the global economy than expected.

Larry Fink, CEO of BlackRock, said the central bank's policy "playbook" needs to be revisited because the impact of rate hikes on slowing economies has a greater lag as the population ages and the housing market changes. "I firmly believe that there is more hidden inflation in the world today than ever before," he stressed.