Interpreting Middle East Economic News and Analyzing Market Trends

Bad timing? Qatar Investment Authority looks to invest $35 billion in US

Where Qatar Invests

Source: This is Money, UK.

Qatar’s sovereign wealth fund, Qatar Investment Authority (QIA), announced its plans of opening an investment office in the US and invest $35 billion over the next five years.  The move comes as it tries to diversify away from Europe and Asia.  Could it have chosen a worse time for this move?

 

 

Qatar plans to invest $35 billion in the United States over the next five years as the world’s richest country on a per capita basis diversifies from Europe and Asia.

The Qatar Investment Authority, which helps manage the country’s energy-generated wealth, opened an office in New York to “better access new and existing investment partners,” the sovereign fund said in a statement Monday.

The Persian Gulf nation will target “various sectors” of the U.S. economy, “creating many American jobs,” Qatar’s ambassador to Washington, D.C., Mohammed Al Kuwari, said in Twitter postings. The fund “remains committed to its investments in Europe, Asia and the Middle East,” it said in the statement.

Qatar announced in April that it planned to set up an office for its sovereign wealth fund in New York as it scouts for deals in the U.S. The Doha-based fund controls more than $100 billion and has deployed the nation’s riches on assets ranging from British bank Barclays Plc to German automaker Volkswagen AG, with many of its investments confined to Europe. 
Read the full article from Bloomberg.

Out of all the sovereign wealth funds, the QIA seems to be the one enjoying the media coverage and buzz over its trophy assets, but as the Japanese learned in the 80s, the Kuwaitis in the 90s and Dubai post 2008, trophy assets aren’t what they are cracked up to be.  Take for example a few of the QIA’s key holdings; Barclays, Deutsche Bank, Credit Suisse and VW.  All four are trading well below their highs.  Over the last two years, shares of Barclays are down 17.5%, Deutsche Bank down 35%, Credit Suisse down 25% and VW down 18% due to its ongoing scandal.  The QIA is right to want to diversify… diversify away from losing investments!

We reported on Deutsche Bank last year as the QIA injected emergency equity into the bank to the tune of 1.75 billion euros (read the post here) only to go on and require additional emergency equity and eventually failing the EU’s stress test.  To top it off, both heads of the bank announced their departure shortly after sparking rumors of bigger problems at the bank.  The bank obviously has big problems, such as its 50 trillion euro derivatives exposure and its exposure to Greece to name just two.

With falling commodity prices across the board, Qatar’s two income earners; oil and natural gas, are hitting rock-bottom prices.  Prices will most likely stay low for a few years greatly reducing the QIA’s cash available to invest.  Isn’t it time the QIA looks into its current holdings to see what it is really holding? A move to the US now is a little late in the game with valuations as high as they are and the economy teetering on recession.  The US, however, will welcome the QIA with open arms looking to sell it all the trophy assets it wants.