Qatar fund surges ahead in investments

DOHA/DUBAI: Whether it's snapping up glitzy buildings or stakes in luxury carmakers, Qatar's state fund has its hands everywhere - and more high-profile deals are expected, fuelled by the Gulf state's natural gas riches.

Analysts say the US$70-billion (US$1 = RM3.22) Qatar Investment Authority (QIA) is set to focus increasingly on Asia and other emerging markets, and will have to diversify away from "trophy assets" to ensure sustainable growth.

It may invest US$2.8 billion in Agricultural Bank of China's initial public offering (IPO) in an important emerging market foray, and has closed several key deals in east Asia in recent months.

QIA has made a string of headline-grabbing investments over the past couple of years, including iconic London department store Harrods, which it acquired in May for about STG1.5 billion (STG1 = RM4.83), and a 10-per cent stake in car maker Porsche, bought for US$10 billion last September.

"We see Qatar continuing to deploy capital abroad at a rapid clip, while other sovereign funds are nursing their larger portfolios negatively impacted by the crisis," said Khuram Maqsood, a former investment director at Dubai-based investment company.

This is both because Qatar has enough money and the fact that its existing investment portfolios are not very large compared with its other Gulf peers, he said.

The world's largest exporter of liquefied natural gas (LNG) boasted one of the fastest growing economies worldwide in 2009.

It grew at an average pace of 17.4 per cent over the past five years and it is set to largely outperform other Gulf energy producers.

"I'd expect them to be looking at a broad range of assets as they build up a large, balanced portfolio," said Simon Williams, chief economist at HSBC in Dubai.

"Qatar will be a major player in global markets for many years to come. It is a small economy that is still in the process of capitalising on its enormous hydrocarbon resources," he said.

Recent purchases include the Park House development on London's Oxford Street by Qatari property company Barwa Real Estate , a unit of the fund, for STG250 million pounds.

"They've been very smart about picking trophy assets, the ones you can only get your hands on in distressed times," said Emad Mansour, chief investment officer of Qatar First Investment Bank.

In addition to its Harrods (right) stake, Qatar also has stakes in supermarket chain J. Sainsbury and the London Stock Exchange .

But QIA faces several challenges as it evolves as a mature sovereign fund like some of its peers. Emerging market investments, especially in financial sector, remain a challenging business environment.

The fund, set up in 2005, is too young to have established a credible track record but may need to scale down on its aggressive strategy as it evolves further.

"Portfolio management, at the end of the day, is a very difficult task. Some high profile assets may run into trouble during challenging times. In such cases, one will have to consider an investment strategy that is not focused so much with brand names," said Maqsood.

"You cannot always be betting on Ferraris. You also have to look at Toyotas and Mini Coopers at times."

The tiny state began its entry into Asia earlier this year: in April, Qatar Diar, an investment arm of QIA, closed a US$275-million acquisition of the historic Raffles Hotel in Singapore.

Other recent forays into Asia include a deal in Malaysia and a US$1-billion Indonesian fund to invest in infrastructure and natural resources. More such deals are expected as investment opportunities in the developed world slow down.

QIA's investment in the initial public offering (IPO) of Agricultural Bank of China is seen as a long-term bet to the growth prospects of the Asian giant and also signals further cooperation between the two countries in future.

"China is a powerful block, and it unlocks a lot of Asia. The whole country is so big that part of it is always booming," said Steven Humphrey, head of construction consultancy Davis Langdon's Qatar office. - Reuters