Linking the LIV Tour and the Saudi Arabian Investment Fund
One of the greatest civil wars in sports history is occurring at the moment, right under our noses. Not since the NBA/ABA merger have we had such a seismic shift in the way that an existing sports league is being essentially turned upside down. The upstart LIV Golf Tour (named so for the 54 holes that makeup a golf tournament) has seemingly appeared out of nowhere, and they mean business.
For the last month, they have been scalping the PGA Tour, the existing gold standard professional golf league around the world. The first big fish they landed was six-time Major Champion Phil Mickelson, followed by newer names like Bryson DeChambeau, Dustin Johnson and, most recently, Brooks Koepka.
But how is this new, unproven league poaching the biggest names in the sport away from the existing, established PGA Tour? Money! These players are being offered literally hundreds of millions of dollars to join the LIV Tour, headed by former PGA great Greg Norman. Norman, currently on his press tour to legitimize his new operation, also spilled the beans on an offer rejected by Tiger Woods to join the LIV Tour. The offer? According to Norman, it was a "mind-blowingly enormous" amount of money that was "in the high nine-digits." Essentially, Tiger turned down a $1 billion offer to do the same job with less stress. Should we all be so lucky.
But this begs the question: where the hell is the LIV Tour getting all of this money to not only offer Tiger $1 billion to join the tour, but also to pay the other golfers I mentioned cash out the ass, and pay tournament winnings every weekend? That's where the country of Saudi Arabia comes in. Seriously.
Today, I'm going to unveil the mysterious world of the Saudi Arabian Public Investment Fund. What is it? Who runs it? And why is the fund so interested in golf? Let's get into it.
What Is The Saudi Arabian Public Investment Fund?
The Public Investment Fund of Saudi Arabia (PIF) is the sovereign wealth fund for the country of Saudi Arabia that allows the country to invest in "productive commercial projects that are strategically significant to the development of the Saudi Arabian economy."
The PIF isn't unique. Many countries have similar sovereign wealth funds that are purpose-built to invest in projects to further the economic advancement of the country. Where the Saudi version of the PIF stands out, however, is in its size.
Why Does The Saudi PIF Exist?
Established in 1971 on the back of the oil boom in the Middle East, the Saudi PIF has now grown to contain a $620 billion war chest for economic development. So what do they spend it on? Well....that's a tough one to answer. Why? Because not only does the Saudi PIF stand out for its size, but it also stands out for two much less fun reasons:
It's commonly referred to as "the least transparent sovereign wealth fund in the world," including by the Wall Street Journal in an expose on the fund in 2016. Also...
It's directly controlled by Crown Prince Mohammed bin Salman
When King Faisal bin Abdulaziz Al Saud established the fund in 1971, it was originally built to be a shepard for the country's interest in public equities. Instead of a hedge fund investing $50 million in Apple stock, just imagine the entire country of Saudi Arabia investing $5 billion in the company. That's a big enough dividend check to get Warren Buffett hard.
Related: How Do Hedge Funds Work?
However, things changed in 2014. I mentioned earlier that other countries have sovereign wealth funds, and those countries began to use them to buy influence with other states around the world. When Saudi Arabia saw this, they decided to start throwing their weight around. That's not to say that they divested from public equities: they still own significant stakes of companies like Uber (5%), Capcom (5%), Saudi Aramco (5%), as well as smaller stakes in Boeing, Citigroup, Meta Platforms, Bank of America and The Walt Disney Company. However, 2016 is when this fund got really interesting.
The Controversies Surrounding the Saudi PIF
The Saudi Arabian-SoftBank Vision Fund
In 2016, Japanese investment bank SoftBank Group, headed by founder Masayoshi Son, announced a new partnership with the Saudi Arabian PIF to form "The Vision Fund." Under Son's stewardship, this fund established a $45 billion pool meant to be spread out to various upstart tech companies over the following five years. What followed was...not that.
Son began a worldwide tour of up-and-coming tech companies shortly after the announcement of the fund, which is when he stumbled upon a founder in New York City by the name of Adam Neumann. If that name sounds familiar to you, you've likely watched the recent Apple TV+ series "WeCrashed." That's right! This is a WeWork story.
This world tour was not Son's first rodeo. In 1996, Son invested heavily in Yahoo, which was a huge ROI investment for the firm until Google came through and ate its lunch. In 2000, he created SoftBank Ventures Asia, a Korean-oriented venture capital firm that actually performed pretty well. Later that same year, he invested $20 million in a Chinese e-commerce company called "Alibaba." When Alibaba went public in 2014, that $20 million investment was worth $60 billion. It's safe to say that Son is pretty fucking good at this.
So when Son met Neumann, he thought he knew what he was getting into. He was investing in an enigmatic founder with a future-forward vision of how people will live and work. What he was actually investing in was quite different: well reported cases of corporate fraud, borrowing against shares and the strangest S-`1 filing this author has ever read. This resulted in a shelved IPO for WeWork, the ousting of Neumann with one of the biggest golden parachute payments in modern history, and a loss of $17.7 billion in fiscal year 2019-2020. This loss was the biggest loss in SoftBank investing history, and wiped out over one-quarter of the Saudi Fund's allotted to the Vision Fund.
Investments in Former Trump Administration Officials
Former U.S President Donald Trump was not shy about his affinity for Middle Eastern administrations. He frequently visited the Middle East on diplomatic trips, attempting to broker deals with leaders to benefit the United States. Top of his list? Crown Prince Mohammed Bin Salman. Trump met with Salman to lock down a $40 billion defense contract with Saudi Arabia over the building of infrastructure projects in the U.S, which somehow included Black Hawk helicopters.
After Trump left the White House, his son-in-law and former advisor, Jared Kushner, started his own investment fund named "Affinity Partners." Affinity Partners announced their formation with an initial assets-under-management figure of $2.5 billion, of which $2 billion had come from the Saudi PIF despite apparent objections from internal advisors. Ethics experts take issue with the payment into the fund, viewing the cash injection as a potential form of kickback for preferential treatment shown to the kingdom of Saudi Arabia during Trump's years in office.
What followed this move by the PIF was...actually pretty remarkable. Kushner, a Modern Orthodox Jew, decided to hone in on Israeli startups to fund with his venture money. This payment from the Saudi PIF to Kushner to then be paid into Israel actually marks the first time in history that money from the fund will be used within Israel, as the two countries do not have formal economic relations.
How did the PIF follow this up? As soon as former Treasury Secretary Steve Mnuchin left office under the Trump Administration, the PIF threw $1 billion at his new private equity firm. Here we go again.
*Following the publication of this article, it was revealed that Jared Kushner is privately battling cancer. We'd like to wish him good luck and a speedy recovery.
The Takeover of Newcastle United and the Premier League Backlash
Up until this point, there's always been a face to the public investments that the PIF have made. There's Masayoshi Son and Adam Neumann, or Jared Kushner and Steve Mnuchin. This time, however, Prince Bin Salman was in the spotlight.
In 2020, Newcastle United owner Mike Ashley was ready to sell the club after years of underperforming and getting shit from fans. While he got several bids, one prospective owner came exploding onto the scene: the Saudi Arabian government. Through the PIF, they lodged a $400 million bid for full ownership of the club.
This is where it gets really interesting. The Premier League, doing their best David Sten impression, vetoed the sale and refused to ratify the new owners. Ashley went to war against the Premier League in the courts, eventually winning the battle in October 2021 following written assurances that "the Kingdom of Saudi Arabia will not control Newcastle United Football Club."
This confirmation by The Premier League was immediately unpopular, and various groups let them hear it. Human Rights advocacy groups immediately grabbed their megaphones and urged The Premier League to block the sale. Amnesty International, in this instance led by the widow of murdered journalist Jamal Khashoggi who was killed by the Saudi regime, requested that The Premier League introduce a "human rights clause" into ownership contracts to prevent those that violate human rights from owning clubs.
Ultimately, the sale did go through, immediately making Newcastle United the most cash-rich professional sports team in the world. This is despite the 19 other teams in The Premier League voting against the sale, as well as publicly condemning the sale.
The LIV Tour and Sportswashing
This brings us back to where we started: The LIV Tour. In 2021, previously mentioned shark-themed clothing purveyor Greg Norman had an axe to grind with the PGA Tour. Norman has been attempting to form a breakaway golf league from the PGA since he was an active player in 1994, originally attempting a partnership with Fox to make it happen. However, the idea was abandoned after the FTC unanimously voted it down and then-PGA commissioner Tim Finchem threatening lifetime bans from the Tour.
Well, here we are again. Norman is now the CEO of a breakaway golf league that has significant funding from the Saudi Arabian PIF to the tune of $2 billion. But it's that funding that is causing the backlash.
Phil Mickelson, as I mentioned earlier, is the biggest name to join the tour. However, he recognizes the issues with taking money from the Saudi fund and working directly with the Saudi Arabian government:
These are scary motherfuckers. We know they killed Khashoggi and have a horrible record on human rights. They execute people over there for being gay. Knowing all of this, why would I even consider it? - Phil Mickelson via Alan Shipnuck
Immediately following the release of this quote, Mickelson joined the LIV Tour when they threw $200 million at him.
The Bottom Line
So why is Saudi Arabia so interested in sponsoring sports leagues, despite the constant negative attention? Well, it's called "sportswashing." Essentially, it's the use of the "feel-good" nature of sports in an attempt to divert attention away from the horrible shit you've already done.
Kill a journalist? Hey Premier League, time for some big-name transfers! Invade Poland? Host the 1936 Summer Olympic Games! Get convicted on abuse of office, bribery, corruption and sex scandal charges while you're the sitting Prime Minister of Italy? Purchase Inter Milan and gain political support from a rabid fanbase! Continue to violate human rights in your own country? Let's throw some cash at some golfers and have Greg Norman take some heat. Maybe we can sell some merch.
Related: Investing In Manchester United
As you can tell, this practice isn't new. The earliest recorded instance of sportswashing was the 1934 World Cup (because OF COURSE FIFA is involved) that was held in Italy under the rule of Benito Mussolini. It's so pervasive that it was even a joke in the HBO series "Veep," where a Georgian dictator gains global favor by purchasing Leeds United.
It happens in every sport, in every country, and even with some corporations. The LIV Tour, like their piggy bank in the Saudi PIF, just happens to be the biggest, loudest and richest example.