[News Inside Companies] Bin Salman Saudi Sovereign Wealth Fund Reaches Out to Domestic Content Industry

[Asia Economy Reporter Kang Nahum] The Saudi Arabian sovereign wealth fund PIF (Public Investment Fund), which had invested nearly 5 trillion won in domestic game companies, is reportedly planning to invest around 800 billion won in Kakao Entertainment, bringing the fund's enormous financial power back into the spotlight.

[Image source=Yonhap News] Saudi Arabia's de facto ruler, Crown Prince Mohammed bin Salman, the first in line to the throne, has declared his intention to transform Saudi Arabia into an open and moderate Islamic country.

Active investments in IT and game companies... 'Post-oil' industrial structure transformation

According to industry sources on the 23rd, PIF is discussing a plan to invest up to 800 billion won in Kakao Entertainment together with Singapore's sovereign wealth fund, the Government of Singapore Investment Corporation (GIC). It is reported that Kakao Entertainment has been attracting about 1 trillion won in investments for new mergers and acquisitions (M&A). Kakao Entertainment stated, "We are reviewing various options regarding investment attraction, but nothing has been finalized yet."

PIF is led by Saudi Arabia's influential Crown Prince Mohammed bin Salman. It is one of the world's top sovereign wealth funds with approximately 500 billion dollars (about 600 trillion won) in assets. Established by royal decree in 1971, it boasts a long history as a Gulf region sovereign wealth fund alongside the Kuwait Investment Authority, which was founded in the 1950s.

For decades, PIF played a passive role as a holding company for government-owned shares in Saudi public enterprises without significant activity. However, in March 2015, the Saudi Council of Ministers decided to transfer PIF's supervision from the Ministry of Finance to the Council for Economic and Development Affairs (CEDA), led by Crown Prince bin Salman, marking the beginning of a change in PIF's role. At that time, Crown Prince bin Salman also became chairman of PIF, and its board of directors was composed of technical bureaucrats close to him.

In the past three years, PIF has shown a tendency to make strategic investments in foreign companies with advanced technology and high growth potential. This is analyzed to not only diversify Saudi Arabia's revenue sources but also to contribute to increasing the share of non-oil industries in the Saudi economy in the long term.

'K-Content' recognized by bin Salman

Foreign media reported that PIF allocated about 10 billion dollars (approximately 12 trillion won) to purchase shares in companies related to information technology (IT) and renewable energy. In particular, Crown Prince bin Salman is known to have a strong interest in the gaming industry, and since launching the Savvy Gaming Group in January, he has been making massive investments to realize the goal of leading the global gaming industry.

PIF owns 4.9% of Activision Blizzard, the maker of global hit games such as StarCraft, and recently purchased 5.1% of the Japanese game company Capcom. It also acquired the global e-sports company ESL Gaming for 1 trillion won.

Korean game companies have also been included in Crown Prince bin Salman's 'shopping basket.' PIF secured a 9.26% stake in NCSoft, surpassing Netmarble and the National Pension Service, who were the second and third largest shareholders, to become the second largest shareholder. Additionally, PIF has made cumulative investments of about 2.3 trillion won in Nexon Japan, effectively becoming the second largest shareholder.

This comprehensive investment in domestic game and content companies is analyzed to be due to the elevated status of Korean content. An industry official said, "Since Korea has industrial competitiveness across a broad spectrum of content such as games, K-pop, and dramas, it is likely that PIF found it an attractive investment destination."