The decision of Qatar‘s sovereign wealth fund to seed a publicly-listed investment firm on the Qatari stock exchange is not only an interesting development in asset management in the region, but also one that says a lot about the organization’s willingness to open itself up for additional scrutiny as reported by Qatar Chronicle.
Qatar Holding – the company backed by sovereign wealth from the Qatar Investment Authority – is to put USD 3 billion into the new investment vehicle listed on the Qatar stock exchange, which is to be called Doha Global.
The plan is to raise a further USD 3 billion in an IPO which will be open to Qataris only, and then to open up subscriptions further with a goal of reaching USD 12 billion. The new vehicle will invest in all asset classes and, as the name suggests, will have a global focus.
The Qataris’ motivation for the move is to give the local stock exchange a boost, while encouraging nationals to invest their wealth alongside that of the country. However, Doha Global’s investment strategy will be answerable to a board of directors, and ultimately to public shareholders – which may be a cultural shift for all those involved with the sovereign fund.
The new vehicle will be committed to dividend targets, and performance will be pored over in market updates and annual reports. It’s questionable whether it will be able to replicate the QIA ‘s strategy – a key component of which is huge, long term deals, often for distressed assets – under these conditions, as the traditional veil of secrecy that SWFs operate under will not be an option if investments go wrong.
However, Qatar in recent times has been a special case where SWFs are concerned. Qatar Holdinghas become a more vocal and involved investor – as evidenced by its position on the Glencore-Xstrata deal last year, when it spoke out publicly in favor of the merger – and has broken with the archetype of a Middle Eastern SWF by seemingly courting publicity.
Thanks to its investment in ‘trophy assets’ such as Harrods, and its ownership through a subsidiary of the French Football Club Paris Saint-Germain, anyone with even a passing interest in finance can hardly fail to be aware of the Qatar Investment Authority and the vast wealth and power it wields.
Far from conventional
Qatar‘s activity on the global stage is all the more interesting because it contrasts with other SWFs in the Middle East which are adopting a more local or regional focus. After the double whammy of the global financial crisis and the Arab Spring, governments began to prioritize domestic spending and development, and the role of some SWFs shifted accordingly.
Bahrain’s Mumtalakat Holding Company was the clearest example of a fund that has been given a revised mandate to invest domestically, and now concentrates on direct investment projects in the country. But elsewhere in the region, funds with development objectives – such as the Mubadala Development Company and the Emirates Investment Authority in the UAE – are playing an increasingly visible role.
This trend has been recognized in recent studies. The 2012 Invesco Middle East Asset Management Study classified sovereign funds into four categories depending on their primary objectives and focus. Some of the largest funds are ‘diversification vehicles’, preferring passive, low risk and geography-neutral investments; relatively few are genuine ‘asset managers’, defined as having an investment focus based on pure risk and return.
Others are ‘policy supporters’ which invest internationally to promote a country’s national interests; but the report identified that the funds attracting more sovereign money are those which are ‘development agencies’, in other words, orientated towards boosting the local economy.
Among Middle Eastern sovereigns, Qatar and the UAE stand out in that their vast wealth and confidence in their own position mean they are able to use sovereign wealth for such development purposes at the same time as playing an increasingly visible role on the world stage.
By setting up several parallel funds in the case of the UAE, or by operating through subsidiaries in the Qatar, they are able to wear a number of hats at the same time and fulfill an increasing range of functions. Publicly-listed investment vehicles are perhaps just the latest manifestation of that, and so we await the results with interest.
Source : Qatar Chronicle
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