Qatar Holding, the strategic investment arm of Qatar Investment Authority (QIA), will take a 5 per cent stake in the Brazilian banking unit of Spain's Banco Santander in a deal worth US$2.7 billion (Dh9.9bn).
Investors across the world are trying to capitalise on strong forecast growth in large emerging markets such as Brazil, China and India. The IMF expects Brazil's economy to expand by 7.4 per cent this year, far surpassing subdued growth in the developed world. "This acquisition accomplishes our objective this year of increasing our exposure to fast-growing emerging markets like Brazil, after our earlier investment in China during the summer," said Dr Hussain Ali al Abdulla, the vice chairman of Qatar Holding. "This will further diversify our portfolio's geographical coverage, this time to Latin America."
Qatar Holding is the second Middle Eastern investor to take a major stake in Banco Santander's Brazilian unit. Aabar Investments, a large investor in financial companies and property owned by the Abu Dhabi Government, invested $328 million in the bank when it listed its shares.
Banco Santander is Spain's largest bank and one of the biggest in the world by market capitalisation.
The purchase builds on a string of deals by Qatar Holding in the past two years, including the £1.5bn (Dh8.76bn) acquisition of the Harrods department store in May and several other high-end London properties. QIA is thought to hold about $70bn of assets.
After remaining in the rafters for much of the boom period, Qatar Holding, founded in 2005, has now emerged as a major sovereign investor in the global marketplace. One of its main focuses in the past year has been London property. Last October, QIA bought a 24 per cent stake in Songbird Estates, a property trust that controls 70 per cent of the offices in London's Canary Wharf business district. The move came just months after it a bought a 10 per cent stake in Porsche as part of a €7bn (Dh35.79bn) deal. Qatari Diar, which is part-owned by the government of Qatar, has stakes in two of London's largest development projects, Chelsea Barracks and the Shard Tower.
But it was the acquisition of Harrods this year that put Qatar Holding on the map for trophy assets. The 176-year-old building has been sold only four times in its history and Qatar Holding's executives bought it from Mohammed al Fayed who bought it along with his brothers for £615m in 1985. Many of the region's sovereign wealth funds have shied away from the bold investments of 2007 and 2008, such as Abu Dhabi Investment Council's purchase of a 75 per cent stake in the Chrysler building in Manhattan.
Qatar Holding will make its 5 per cent purchase through a bond that converts into shares, the fund said in a statement yesterday. The three-year bonds come with 6.75 per cent interest and are exchangeable for shares in the bank. The investment also builds on Qatar Holding's strategy of buying strategic stakes in emerging market financial institutions. It bought a more than $2.8bn chunk of Agricultural Bank of China in its public offering in July.
It may also have political overtones. While many prefer to stay apolitical, some Gulf investment funds are using their considerable financial weight to strengthen economic and strategic ties with emerging-market countries after the downturn.
"This reflects our commitment to strengthen bilateral ties and economic co-operation with an important growing economy," said Sheikh Hamad bin Jassim bin Jabr Al Thani, the prime minister of Qatar and chairman of Qatar Holding.