The final quarter of 2022 was hugely disappointing for PIF’s US public equity holdings with the diving value of Lucid Motor’s stock wiping US$7.4 billion off the value of the stockholding, representing 1.2% of the Saudi sovereign fund’s AUM.

Over the course of 2022, Lucid’s stock price fell by around 84%, a worse performance than its bigger rival Tesla which fell around 70%. In a recent SEC filing, Lucid disclosed that PIF bought nearly 86 million shares of the EV manufacturer at an average price of US$10.7 per share (a premium over today’s US$6.70, amounting to US$915 million, and raising the fund’s ownership to around 1.1 billion shares. This formed part of a US$1.52 billion capital raise with the rest raised through an offering of 56.2 million shares of its common stock.

Longer-term, Lucid will have to ramp up production and see continued appetite for its EVs to turn its stock price around. Part of its problems relate to supply chain issues affecting the entire automotive industry, but it has been the worst affected of all EV manufacturers. PIF does not look like abandoning the young EV producer any time soon and remains committed to the brand.

If PIF were to have left the rest of its portfolio untouched, its US stockholdings would be worth US$30.3 billion, down US$6.5 billion or 17.7% over the October-December period. Its reported non-Lucid US public equity holdings at end-September are now worth 4.2% more. However, this is still behind the performance of stock market tracking indices with the S&P 500 up more than 7% and the Dow Jones Industrial Average rising nearly 16% over the same period.

If the same positions were held, the big gainers in the PIF portfolio would have been its holdings in listed infrastructure firms (up US$486 million, +15.8%), retail and consumer (up US$189 million, +1.8%), and energy and natural resources (up US$162 million, +37.8%). However, this is partly offset by the poor performance of its tech stocks, which declined US$301 million or 6.5%.

Compared to end-Q1, these performances in Q4 would see the portfolio’s sectoral exposures shift towards retail and consumer from 25% to 36% of the total, while industrial holdings fell from 61% to 30% largely due to Lucid’s woeful performance.

While PIF may well show some buying and selling activity in its next 13F disclosure in a few weeks, in recent quarters it has been content to maintain its US equity portfolio in a holding pattern – particularly in shares that align closely with its national interests, such as gaming stocks. If it has retained its relatively conservative position, it is safe to say that the portfolio beyond Lucid saw lackluster performance over the quarter.

Yet, quarterly performance of liquid assets is not something that should bother a rapidly growing strategic fund like PIF, which has multi-year horizons. Indeed, even the annual performance provides some relief. Its US equities portfolio (minus Lucid) grew +37%, helped largely by stock price growth, particularly in the infrastructure and financial services sectors. This compares favorably with the S&P 500 (-20%) and the DJIA (-9%). Yet, Lucid remains a dampener, dragging down the whole value of the portfolio by 46% across the course of the year.

Related funds PIF
Related tags Equities Automotive