DOHA // The Bahraini sovereign wealth fund that owns a stake in the car maker McLaren expects to return to profit this year, even as state funds face tighter regulation after the global financial crisis. Bahrain Mumtalakat Holding, the GCC state's US$10 billion (Dh36.7bn) fund, suffered losses connected to its stake in the national carrier Gulf Air and a reduction in aluminium prices, affecting its investment in the metal maker Aluminium Bahrain (Alba) last year, said Talal al Zain, the chief executive of Mumtalakat.
An expansion of the airline's routes and McLaren's good growth prospects were among the reasons for expecting a return to the black this year, he said. "The major contributor to our consolidated loss in 2009 was Gulf Air," Mr al Zain said yesterday. "With new management at the airline, we are already seeing the impact of a turnaround strategy, and the airline is on budget for January to the end of April, so we are targeting a big reduction in losses for Gulf Air this year."
Under Samer Majali, who was appointed the chief executive last year, Gulf Air planned to strengthen its Middle East network and expand its flights to Europe to connect the kingdom to more financial centres, Mr al Zain said. Mumtalakat has a portfolio worth about $10bn invested mostly at home and including full ownership of Bahrain Airport Company, 50 per cent of Gulf Air, 79 per cent of Alba, 49 per cent of National Bank of Bahrain and 42 per cent of McLaren Group.
"Our objective is to diversify our investments from Bahrain, including asset classes and geographic location, to consider opportunities globally," Mr al Zain said on the sidelines of the World Economic Forum Global Redesign Summit in Doha. Mumtalakat aimed to secure more liquid investments, including fixed income, and invest in capital markets and hedge funds to provide shorter-term investments and recurring income to balance the company's assets, Mr al Zain said.
It would also increase its exposure to emerging markets. The company was seeking a rating to enable it to issue a bond this year, Mr al Zain said. The size of the bond was still to be decided but would be at least $1bn, he said. The company also planned to divest some of its assets, while possibly selling stakes in some of the companies in its portfolios, either to strategic partners or as shares to the public. Mumtalakat's plans to diversify investments globally come amid warnings that the investments of sovereign wealth funds are likely to come under greater scrutiny.
Faced with increased regulations in the West, some sovereign wealth funds may opt to invest in domestic markets, Sultan al Suwaidi, the Governor of the UAE Central Bank, said in a speech last week. Robert Lawrence, a Harvard University business professor, said: "The risk is perhaps we won't get as much investment as perhaps we would have, and [sovereign wealth funds] will remain liquid." @Email:email@example.com