Saudi positions new pension fund to challenge world's top investors

New entity will have assets of over $250 billion, compared to Japan's Government Pension Investment Fund, the largest in the world.

Saudi Arabia gave a first glimpse of the ambition behind the merger of two of its pension and insurance funds with a plan to rival the world’s largest investors.

The new entity will boast assets of over $250 billion, according to the chief executive officer of Hassana Investment Co, the investment management arm of the kingdom’s General Organization of Social Insurance. GOSI, as the fund is known, will combine with the Public Pension Agency in a move that will reduce costs and help increase investment returns, Saad Al-Fadly, CEO of Hassana, said in an interview.

“The merger will strengthen the position of the fund, enhance performance, and position GOSI as one of the top 10 pension plan investors in the world,” he said, in the first public comments to put a figure on the size of the new state investor.

“Scale is a benefit that helps in relationship management, cost management and in negotiations, so it helps in many aspects which will improve returns,” he said.

Saudi Arabia has been taking steps to merge and restructure various entities as it looks to boost efficiency as part of a plan to diversify the economy away from oil. It’s also been building up its sovereign wealth fund to raise its reach and influence. The government has outlined a plan to grow its assets to over $1 trillion by 2025.

Diverse Portfolio
 

The GOSI and PPA merger, which was announced last week, will create a fund that not only holds large stakes in Saudi companies, but also has a global portfolio that includes shares worth $204 million in AstraZeneca Plc and $171 million in HSBC Holdings Plc.

Domestic assets include a combined $8.7 billion holding in Saudi National Bank and a $4.3 billion stake in Al Rajhi Bank, according to data compiled by Bloomberg. Their portfolios also include real estate and bonds.

The funds will conduct a review of investment strategy as part of the merger process, Al Fadly said. “Returns have been really good, and we hope that will continue,” he said, declining to give specifics.

Hassana has meanwhile joined a consortium of investors with EIG Global Energy Partners of the U.S. and China’s Silk Road Fund that are paying $12.4 billion to acquire a 49% stake in Aramco Oil Pipelines Co.

The largest public pension fund in the world is currently Japan’s Government Pension Investment Fund, with assets of $1.7 trillion, according to data provider Global SWF. The 10th largest fund -- the New York State Common Retirement Fund -- has assets of $255 billion.