Saudi Arabia's sovereign wealth fund to invest in infrastructure projects

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Saudi Arabia's sovereign wealth fund to invest in infrastructure projects

The Public Investment Fund, Saudi Arabia's sovereign wealth fund, which is chaired by the crown prince, has agreed to commit to up to a fifth of a proposed $800 million Middle East infrastructure fund, established by Aberdeen Standard Investments and Investcorp.

The Asian Infrastructure Investment Bank has received the pledge of as much as $160 million from the PIF, as the wealth fund is known, along with another $90 million commitment from the Aberdeen Standard Investcorp Infrastructure Partners Fund, according to a statement Thursday. The rest of the financing is expected to come from investors including pension funds, insurance companies, endowments and private clients, it said.

Aberdeen and Investcorp announced the fund two years ago with a view to divert investment into the Middle East’s health care, education and utilities industries. Last month, the former U.K. defense secretary Michael Fallon was appointed chairman of the fund.

The economic context of modern times has created a gap between the need to develop or upgrade critical infrastructure or the resources available for such projects, according to Investcorp co-chief executive Hazem Ben-Gacem.

Saudi Arabia is increasingly looking at reducing new infrastructure expenditures from Finance Ministry as it seeks to close budget deficits. The PIF itself is expected to spend $40 billion a year domestically over the next five years, with much of that money expected to go towards large new infrastructure and tourism projects.

The $400 billion PIF is also becoming more important as a source of capital for fund managers in the Middle East as it embarks on a plan to support Saudi economy's diversification away from oil sales. It has established an anchor investor in a $200 billion private investment fund managed by NBK Capital Partners in February and will also meet a $1.1 billion fund of funds to support venture capital firms investing in the kingdom.

The infrastructure fund is part of Investcorp's plans to enhance its assets under management to $50 billion. It is also planning to launch a $500 million Saudi fund later this year, Bloomberg told earlier this month.

Investcorp is also currently raising a $1 billion North American private equity fund to do larger buyouts there, people familiar with the issue told Bloomberg in March. The private equity firm is currently in the process of delisting from the Bahrain Stock Exchange.

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