Saudi PIF explores securitisations and stake sales to fund portfolio growth

The Public Investment Fund (PIF) in Saudi Arabia is exploring new funding methods, such as securitizations and selling stakes in portfolio companies, to boost investment growth and lessen its dependence on direct equity funding, according to a Reuters report. The fund, overseeing assets worth over $900 billion, is contemplating securitizing income streams from portfolio firms, along with offering partial ownership in established businesses and securing external financing for newer ventures.

These discussions are still in the preliminary stages, with no specifics on potential transaction sizes or the companies affected. The proposals align with PIF's strategic plan from 2026 to 2030, which prioritizes generating returns from existing investments and boosting private sector involvement in Saudi Arabia's economic modernization.

This shift follows a decade of significant investments in real estate, technology, infrastructure, and other fields under the kingdom's Vision 2030 program. However, attempts to attract external investors have faced obstacles, including disagreements over valuation and apprehensions about managing strategic assets. A decline in Gulf Initial Public Offerings (IPOs), reduced liquidity among Saudi banks, and economic turmoil due to the Iran conflict have further complicated fundraising efforts.

Over the past decade, the PIF's annualized shareholder return has decreased to 5.8% as of the end of 2025, down from 7.2% the previous year. The fund has already undertaken several initiatives to secure additional capital. For instance, Kingdom Holding acquired a 70% stake in Saudi football club Al Hilal, and PIF is considering a minority share sale in Newcastle United.

It has also finalized the sale of a 49% interest in AI company Humain to Saudi Aramco, which will inject $2.6 billion into the business this year. Research firm Global SWF suggests that the magnitude of PIF's domestic investment portfolio implies that future expansion will not rely solely on new equity contributions from the sovereign wealth fund.

To achieve growth, portfolio companies will need to become more financially self-sufficient, generating cash flows and securing their own financing to fuel expansion.