REUTERS
Saudi Defence Minister, Prince Mohammad bin Salman (C), visits the International Defence Exhibition and Conference (IDEX) in Abu Dhabi February 22, 2015.
In an interview with Bloomberg, which reportedly lasted five hours, Saudi Arabia's Deputy Crown Prince Mohammed Bin Salman said that the fund, which would be the biggest in the world - easily eclipsing the funds of both Norway and Qatar - is designed to help the country's economy rely less on oil.
As part of fund's creation, the kingdom will go ahead with an IPO of its state run oil firm Aramco, selling no more than 5% of the company.
Speculation about an IPO for Aramco, which would become the most valuable publicly traded company on earth if it IPO'ed, has been rife since The Economist first reported that it may happen in January. Bin Salman now appears to have confirmed plans, saying that the IPO will happen no later than 2018, but potentially as early as next year.
"IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue, not oil," Bin Salman told Bloomberg. "What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn't depend mainly on oil."
The Saudi economy is heavily reliant on oil, and as a result has suffered massively since prices started to crash in mid-2014. Oil has fallen from more than $100 (£70) per barrel back then, to less than $40 (£27.94) now.
Saudi Arabia is running a huge deficit, around $100 billion (£70 billion), and has had to expend huge amounts of its foreign reserves in recent months. Foreign reserves have fallen by more than $150 billion (£104 billion) since 2012.
News of the plans caused the price of oil to spike. Here's how that looks:
Investing.com