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Malaysia’s sovereign wealth fund forms $2.5 billion Saudi JV

The newly-formed 1Malaysia Development Berhad has teamed up with Saudi-backed investment company, PetroSaudi International to launch a company aimed at co-investing with international investors in projects in Malaysia. Target sectors include energy and real estate.

1Malaysia Development Berhad, the sovereign wealth fund launched this year by the Government of Malaysia to co-invest in alternative assets, has formed a $2.5 billion joint venture with Saudi investment house, PetroSaudi International, aimed at partnering overseas investors in Malaysia.

In an announcement by the fund, 1Malaysia said the joint venture marked a “new era of economic corporation” which “would spearhead the flow of foreign direct investments from the Middle East as well as making strategic investments in high-impact project here.”

The fund said the joint venture “will initiate various projects in multiple sectors which are mutually beneficial as well as in line with 1MDB's mission to drive long-term sustainable economic development in Malaysia”.

1Malaysia was formed out of Malysia’s first sovereign wealth fund, The Terengganu Investment Authority, to team up with partners on an “equal capital” basis to invest in assets that generate high returns.  Target sectors include energy, real estate, tourism and agribusiness. It was formerly known as the Terengganu Investment Authority.

The fund was set up with initial funding of RM11 billion ($3.13 billion), part of which was raised through the issue of Islamic medium-term notes guaranteed by the US Federal Government.

According to the 1Malaysia announcement, PetroSaudi International is a private company mandated to invest in assets which can “strengthen the relationships between the Kingdom of Saudi Arabia and key countries worldwide.”