Saudi Arabia is planning to grow a sovereign wealth fund that could manage more than $2 trillion in future assets, and help wean the kingdom off its dependance on oil.
The first step would be an initial public offering of less than 5% of Aramco, the state-owned energy company that will transition to become an industrial conglomerate, Deputy Crown Prince Mohammed Salman said in an interview with Bloomberg.
Sales from the shares listed in the Aramco IPO, which could happen as soon as next year, would then be transferred to the state’s Public Investment Fund for strategic investments. Potentially, this moves the nation from its status as the world’s biggest crude oil exporter—and where the oil and gas sector accounts for 85% of its export earnings—to a more diversified economy.
“IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue, not oil,” the Prince told Bloomberg. “What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”
A big part of the strategic plan is investments overseas. The fund plans to increase the proportion of foreign investments to 50% of the fund by 2020, up from 5% currently, reported Bloomberg.
If it does reach its $2 trillion target, it would become the largest state-managed wealth fund in the world, exceeding Norway’s. It will also exceed the market cap of the world’s four largest publicly-listed companies: Apple (AAPL) (around $600 billion), Alphabet (GOOG) ($515 billion), Microsoft (MSFT) ($438 billion) and Berkshire Hathaway (BRKA) ($349 billion).
The kingdom’s latest moves are also symbolic in the wake of falling oil prices. “The fact that they’re trying to decouple the country’s wealth from oil revenues will be seen by many as yet another sign that the end of the oil age is approaching fast,” Charles Kronick, Greenpeace U.K.’s senior climate adviser, told The Guardian.
