Saudi Arabia’s Public Investment Fund saw US$6.6 billion wiped off the value of its US public equity portfolio in Q3, around three quarters of which was caused by the 18.6% decline in the value of its stake in Lucid which was worth US$14.2 billion at end-September.

The portfolio was down 9.8% q-o-q in value, but when Lucid is excluded the drop was a less dramatic 3.3% - comparing favorably with the overall 6.8% fall in the Dow Jones Industrial Average and the 5.3% fall in the S&P 500. Lucid represented 39% of the portfolio by end-September, down from 43% at the end of June and 69% by end-2021.

Lucid’s value has slumped 45% in the space of a year as it struggles to compete against Tesla and meet the forecasts it made when it went public in July 2021 through a SPAC merger, having received funding from PIF which retains a 61% share. 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. It has lowered its production targets twice this year, from 20,000 to just 6,000-7,000. In the first year of selling cars, it has carried out three recalls and owners report several technical problems and malfunctions. Facing cashflow issues, it has announced a US$1.5 billion capital raise that is set to dilute the value of PIF’s stake and other existing stockholders.

Other contributors to PIF’s losses in public stock included declines in tech stocks, which saw an overall decline of US$732 million, a drop of 13.6% q-o-q – largely related to declines in the value of its gaming stocks, which the fund had bid on heavily in previous quarters. Gaming is a core part of PIF’s strategy. In June, the fund snapped up an 8.1% in Sweden’s Embracer Group for more than US$1 billion via its Savvy Gaming Group (SGG), which was launched in January as part of its 2021-2025 strategy to increase exposure to the entertainment, leisure and sports market sector. The Saudi state investor has developed a portfolio of chunky stakes in gaming stocks, including Tokyo-listed Capcom and Nexon and SGG purchased Germany’s leading independent eSports company ESL Gaming for US$1.05 billion. Despite the hit to tech stocks, PIF ramped up its positions in Meta (Facebook) and Alphabet (Google).

Infrastructure holdings were also down due to a 6.6% decline in the value of a chunky stake in a utilities ETF. Nevertheless, the relative stability of its retail and consumer stocks – which saw little movement in value – ensured they increased as a proportion of the portfolio from 26% to 29%.

One notable development was PIF’s acquisition of a 0.9% stake in Linde, which was worth US$326 million at end-Q3. As the world's largest industrial gas company by market share and revenue, the company – founded in Germany and headquartered in the UK – is a frequent partner in the Saudi Arabian petrochemicals industry, indicating a strategic reason behind the investment in the stock beyond yield. Linde-SIGAS is the leading manufacturer of all bulk, industrial, medical and specialty gases in Saudi Arabia, while Linde is working with PIF on examining carbon capture and storage. The investment looks like a wise choice in terms of yield as well. Since end-September, Linde’s stock price has risen 27.7%, indicating that the value of the stake has risen by more than US$90 million.

PIF seems content to maintain its US equity portfolio in a holding pattern and while it may add and dispense with some stocks in the quarters ahead, it is likely to maintain its sectoral exposures – particularly holdings in companies that align closely with its national interests.

Related funds PIF