Saudi Arabia’s Sovereign Wealth Fund: Between Bloomberg and Moody’s

Al-Riyadh, Saudi Arabia, February 16

Despite its relatively young age, Bloomberg is a well-established media company. The media arm of Bloomberg was established in 1990, a decade after the birth of its parent company, which provides financial services to major banks, funds and investors. On the other hand, there is Moody’s, which is one of the top three rating agencies, along with Fitch and S&P Global. Despite their prestige and reputation, all of these organizations make mistakes in their estimates. Both Bloomberg and Moody’s made grave mistakes that led, in part, to the global financial crisis of 2007 and 2008. And yet, the world respects and eagerly listens to what both institutions have to offer. If we look at their views about Saudi Arabia’s decision to transfer 4% of the Saudi Arabian Oil Company’s (Aramco) shares to Saudi Arabia’s sovereign wealth fund, we will notice a big difference in views. Bloomberg, in its report, believes that this move will increase the fund’s exposure to the oil and gas sector – a sector that other sovereign funds flee from – and will thus reduce the attractiveness of the Saudi fund to investors interested in the environment and green energy. Meanwhile, Moody’s, which evaluated the fund this month, believes that the deal is a positive step because it will add an asset that produces financial revenues in the form of dividends. At the same time, the fund’s asset base expanded. Moody’s further contradicts Bloomberg when it says that the fund will therefore reduce its exposure to oil and gas. In fairness, this deal should be considered within the broader context of the Public Investment Fund’s investment portfolio, which contains many environmentally friendly projects such as NEOM and the Red Sea Development Company. In fact, this deal is an important step in the fund’s strategy of becoming the largest sovereign wealth fund in the world. Following the recent reallocation of shares, worth $80 billion, the fund became the sixth largest global sovereign fund in the world. With regard to environmentally friendly investments, the fund is expected to soon announce its green strategy, which will show investors how important the environment is to both the fund and the kingdom. The question, however, remains: who will investors listen to? Bloomberg or Moody’s? – Wael Mahdi (translated by Asaf Zilberfarb)