Middle East wealth funds are scrambling to rescue their big bets on the future
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- Saudi Arabia and Abu Dhabi's sovereign wealth funds have had a busy few years.
- The funds have been on a huge investment spree beyond the Gulf, with tech a particular focus.
- Turns out not all those investments are quite going to plan.
On the global stage, few have been as active in flaunting their cash in recent years as the Middle East's most powerful money men.
Leaders of Saudi Arabia's Public Investment Fund (PIF) and Abu Dhabi's Mubadala — sovereign wealth funds that oversee assets worth more than $1 trillion combined — have been on a busy investment spree beyond the Gulf region to stake a claim in whatever takes their fancy.
Data published last month by GlobalSWF, a platform tracking sovereign wealth fund activity, found that over half the $96 billion invested by state-backed funds globally in the first six months of 2024 came from Middle Eastern funds.
A particular focus for these funds built on the back of petrodollars has been to build ownership and influence in the tech sector. Mandates to diversify their economies at home through initiatives like Vision 2030 have created incentives to bet on those with an eye to the future.
In 2017, both funds made a collective commitment of $60 billion to SoftBank's then-newly minted Vision Fund, the world's biggest venture capital vehicle that would go on to transform the world of startup investing with bets on companies like TikTok owner ByteDance and Uber.
More recently, PIF and Mubadala have been busy making tech bets of their own, pouring billions of dollars into everything from electric vehicle companies to fintech startups seeking to shake up the world of finance.
Not all of them seem to be going to plan.
Lucid action
FETHI BELAID
Over the past week, PIF and Mubadala have been busy figuring out what to do when their unbridled ambitions for tech companies face reality.
On Monday, Saudi Arabia's sovereign wealth fund pulled up its money truck for Lucid, the California-based Tesla rival it has 60% ownership of, with a fresh $1.5 billion commitment aimed at helping the company through a tough period.
According to Lucid, the commitment will see PIF affiliate company Ayar purchase $750 million in convertible preferred stock and provide a $750 million loan facility at a critical moment for the firm.
In March, CEO Peter Rawlinson told the Financial Times that although Lucid has sufficient funds to see it through to next year, it was spending about $1 billion a quarter in its mission to deliver luxury EVs to the market.
The heavy spending needed to build a strong EV brand hasn't been helped by a global slowdown in demand for clean energy vehicles, as inflation and high interest rates prompt consumers to spend more cautiously.
The Lucid Air, marketed as "a superior long-range electric sedan" that can hit 60 miles an hour in 1.89 seconds, starts at $69,900.
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Although Lucid now has a new lease of life from the Saudis, Rawlinson acknowledged back in March that it was dangerous to expect the state's "bottomless wealth" would be a constant fallback. How long the Saudis want to stick around remains to be seen.
PIF has also been pushed to offer a lifeline to Magic Leap.
UK filings released for the augmented reality company on August 2 said that the Saudi fund, which has been majority owner since 2022, put $750 million into the struggling business from the start of last year through to July 2024.
The filings also said that "based on the most recent forecasts," the company would need to raise funds again before "late August 2024 and again in January 2025 and June 2025" to meet financial obligations.
Rescue mode
Will the Saudis be the ones to plug that financing hole? If it plans on sticking with Magic Leap in the long term, it'll be aware of just how much support the firm will need, as it's spent 14 years struggling to get its vision for immersive technology off the ground.
Abu Dhabi's Mubadala appears to have been in rescue mode this past week too.
Reports from the Financial Times and Bloomberg have shone a light on efforts being made by the sovereign wealth fund to boost returns in European startups it has invested billions of dollars in.
Several of these nascent tech companies, such as insurance firm WeFox, have been bruised by shifting sentiment in the markets in recent years. The lofty valuations they secured when interest rates remained low have taken a hit, triggering moves such as restructurings and leadership changes, the reports said.
It's worth noting that both Mubadala and the PIF remain in strong positions overall. In May, Mubadala announced that its assets under management in 2023 had risen 9.4% from the year before. In July, PIF said it swung to a profit last year after making a loss in 2022.
Still, both funds will be aware that they have embarked on a globe-trotting mission to establish a reputation for themselves as sophisticated investors capable of making shrewd moves.
Seeing their tech bets fall apart will be a tough reality to face.