x Abu Dhabi, UAESunday 21 January 2018

Qatar wealth fund awakens from its slumber

The country's sovereign wealth fund, the Qatar Investment Authority (QIA) has been conspicuously active of late.

DOHA // Recession, they might be wondering in Doha. What recession? The country's sovereign wealth fund, the Qatar Investment Authority (QIA) has been conspicuously active of late. In the past week alone, its fund subsidiaries Qatar Holdings and Diar have announced major development deals in Yemen and Sudan, plans to open an office in Beijing and the purchase of the US embassy building in London.

With a possible stake in the US$6 billion (Dh22.03bn) purchase of Areva, the world's largest maker of nuclear reactors, in a bid led by General Electric, QIA is suddenly among the most active sovereign wealth funds (SWF) in the world. "Qatar's wealth and new natural gas revenues have added to funds available to QIA," says Rachel Ziemba, a sovereign wealth fund and Gulf economies analyst at RGE Monitor. "It has continued to make high-profile purchases."

QIA had been quiet for the past year after it took a hit in the downturn and restructured under its chairman, Sheikh Hamad bin Jassim bin Jabr Al Thani, the Qatari prime minister. Although the SWF has yet to return to its peak of midway through last year, QIA has increased its holdings between 15 per cent and 20 per cent this year, reaching about $75bn, Ms Ziemba says. The future is even brighter. The Qatari economy is looking at 9 per cent growth for this year. The economies of Dubai and Abu Dhabi, in contrast, are forecast to grow by 5 per cent or less this year. And this week the Sheikh Hamad bin Khalifa Al Thani, the Qatari emir, predicted 16 per cent growth for next year.

Ibrahim Oweiss, a former economics professor at Georgetown University Qatar, attributes the country's economic growth to its considerable financial reserves, investment in infrastructure and liquefied natural gas, and the rise in the price of oil. "The world economy is now turning around; the price of oil and natural gas is expected to rise," Prof Oweiss says. "Hence a 14 to 16 per cent growth in 2010 is attainable."

QIA remains flush from the $1bn sale of almost 380 million Barclays shares on October 20 and, a week before, $4bn from an Islamic debt sale. As a result, more deals are in the works. Qatar Holdings is considering raising its 26 per cent stake in British retailer J Sainsbury. A co-operation agreement with South Korea and a major mixed-use development project in Vietnam lie ahead. These cloesly follow a ?7bn (Dh38.15bn) investment in Volkswagen and Porsche.

With stakes in Credit Suisse, the London Stock Exchange, the New York Stock Exchange and dozens of building projects in France and the UK, QIA had been focused on renewed economic growth in the developed world. Some see the China office and stakes in India, Malaysia and Indonesia as a turn to the East. But that's nothing new. "QIA has been interested in Asia for several years now and in 2008 suggested that its long-term goal was to increase Asia exposure to around 20 per cent," says Ms Ziemba, recalling QIA's investment in the 2006 initial public offering (IPO) of the Chinese bank ICBC.

Other Gulf funds have also embraced Asia's profit potential. Mubadala Development, the strategic investment arm of the Abu Dhabi Government, has joint ventures with Korean and Japanese firms. Kuwait's fund also took part in the ICBC IPO. Dubai's International Capital has made investments in Asia. But many turned away in the downturn. "GCC funds put their Asian investment plans on partial hold through the recession first as they sought to take advantage of seemingly cheap prices in the US and EU, and then as they waited for markets to improve," says Ms Ziemba.

"Investing in Asia (today) is a key part of asset diversification; a fact only supported by its fast pace of growth. However, there's now a lot of money chasing a limited number of assets in Asia and it may still be difficult to find good, high-yielding investments." The opening of an office in Beijing suggests QIA is willing to take its time and do the necessary due diligence to uncover the best buys.

"QIA's approach, including joint investment ventures in target countries, responds to this need to gain help with the red tape and more effectively do due diligence," says Ms Ziemba. "Seeking out local partners and locating more staff in the target region is a good sign that should serve them well, as the asset managers gain local knowledge." Opportunities may also loom in more familiar markets. Qatari Diar has stakes in two of London's largest development projects, Chelsea Barracks and the Shard Tower, and has said it is looking to raise its UK commitments to £5bn (Dh30.5bn) from £3bn.

Some analysts think the fund may invest in the major British banks soon to be broken up. "I wouldn't rule it out," says Ms Ziemba. "QIA and other SWFs continue to increase their exposure to UK properties. I think they will continue to target high-profile, well-respected brands." @Email:business@thenational.ae