What next for LIV Golf and Newcastle United after Saudi PIF strategy shift?

With Saudi Arabia’s Public Investment Fund updating its strategy, what next for the PIF-owned Newcastle United and LIV Golf?

Saudi Arabia’s Public Investment Fund last week published the latest iteration of its Vision strategy, which will cover the remainder of the decade.

The strategy’s publication had been expected for some time. When the last planning cycle drew to a close there had been a marked slowdown in spending, particularly across sport.

We therefore shouldn’t be surprised by the timing of this latest announcement, it’s the way things are done in Saudi Arabia – as an observer once noted, the strategic planning process is one that is akin to the centralised statism evident in the old communist countries.

Nevertheless, with the military and geopolitical situation in the Gulf region remaining sensitive, many people will be inclined to view the document through the lens of war.

Public Investment Fund challenges

The reality is, however, that even before the current conflict began in Iran, both Public Investment Fund and the Saudi government were already grappling with a series of challenges.

Over the last twelve months, giga project cost overruns allied to questions about the long-term sustainability of Saudi Arabian investments have hinted at the direction in which PIF is now moving.

Nowhere has this been more evident than in sport. Earlier this year the 2029 Asian Winter Games were postponed indefinitely having originally been scheduled to take place in the planned city of Neom. Cost issues and construction delays resulted in the event eventually being moved to Kazakhstan.

Notwithstanding such setbacks, Saudi Arabia’s de facto ruler – Mohammed bin Salman – has nevertheless previously reiterated his country’s commitment to sport, famously announcing in a televised Fox News interview that he wants sport to contribute three per cent to the kingdom’s Gross Domestic Product by 2030. The latest strategy wants $2.7trillion in assets under management by the turn of the decade.

The headlines

The headline of PIF’s latest strategy is that the sovereign wealth fund is entering a new phase focused on long-term value creation, private sector growth, and stronger domestic ecosystems.

Over the last decade, across two planning cycles, PIF has acquired or developed multiple assets, including Premier League club Newcastle United and the rebel LIV Golf league.

Now it appears that the emphasis in strategy is changing, assets now either have to deliver or else they could be disposed of. 

Moving forward, not only will PIFs assets be expected to generate a positive financial return, they must also contribute to Saudi Arabia’s national transformation process and the development of sustainable industrial ecosystems.

Again, there’s no surprise here; despite all the past rhetorical bluster about sport washing, sanitising its international reputation through sport was never an objective either for the Saudi government or PIF.

Investing in sport was about diversification, resilience and economic performance which have been given added resonance by the current Gulf conflict.

When shocks to oil and gas markets occur in countries in the Arabian Gulf, then they suffer both the financial and economical consequences. That said, shocks can also have consequences for social stability and national security.

If there is a sector that epitomises the intentions of PIF’s evolving strategy, it is the country’s investment in esports.

Spending on esports has not simply been a matter of largesse, an attempt to capture the zeitgeist or a quest for global legitimacy. Rather a sustained and concerted attempt to create an industrial ecosystem consistent with Saudi Arabia’s diversification attempts, which will create jobs, attract inward investment and make a tangible contribution to national income.

PIF anomaly

Interestingly, only one sport organisation is prominently mentioned in PIF’s strategic documentation – Surj Sports Investment, whose mandate is to invest in, create, and acquire new sports events and IPs, and to host global events in Saudi Arabia.

Over the last few years, Surj has been pivotal in, for example, inaugurating an esports World Cup, acquiring game developer and software producer Electronic Arts, and reaching an agreement with China’s Fifa World Cup sponsor Lenovo to build new production facilities and hardware in the kingdom.

This is what an ecosystem looks like and the release of details about PIF’s next planning cycle will be all about establishing and further developing them for the country’s benefit.

So where does this all leave some of the existing assets in which PIF has invested? 

Well, strong rumours are already circulating that LIV Golf is on the verge of terminal demise, and the prospects for a bumper summer of transfer spending at Newcastle United seems unlikely – neither were ever part of the country’s strategy, they were only episodes of opportunism.

Nobody should be surprised by this. Saudi Arabia has only ever had its national self-interest at heart, the most significant feature of which is the need to reduce its dependence on carbon fuel revenues by creating a new economic model for itself.

This week has seen the next step in this process being announced.

Simon Chadwick is Professor of AfroEurasian Sport at Emlyon Business School