QIA sovereign fund eager to invest in Asia and US

Reuters

• Qatar Investment Authority set to receive additional goverment revenue
• Tech investments in China especially planned
• Ability to invest with cash puts it in strong position

Qatar Investment Authority, the world’s 10th-largest sovereign wealth fund by assets, will expand its portfolio in the United States and Asia – particularly China and India – and aims to take advantage of more “investor-friendly” deal terms.

Several senior QIA executives outlined the fund’s plans to Bloomberg this week in what were rare public comments for an increasingly publicity-shy organisation.

“The QIA goes through cycles of being more communicative – right now, it has large surpluses and is trying to demystify where and how it’s going to spend this additional money,” said Rachel Ziemba, founder of Ziemba Insights, a New York-based advisory firm.

“The Saudis and other GCC funds have also been prominent recently, so that may be another factor in the QIA wanting to highlight some of its own investment strategies.”

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The QIA has $475 billion of assets under management according to the Sovereign Wealth Fund Institute. Now that Qatar’s huge infrastructure spending for last year’s World Cup is complete, it will receive additional government revenue, said chief executive Mansoor Ebrahim al Mahmoud.

Qatar’s first-quarter surplus was QAR 19.7 billion ($5.4 billion) as oil prices remained far above the country’s budgetary break-even level, the finance ministry announced last week.

“There is definitely room for more Asian assets in the portfolios of Gulf SWFs, but Chinese and Indian markets come with lots of risk,” said Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute in Washington.

“More Gulf SWFs are opening offices on the ground in these countries to get a better read of government signals and understand the markets. It’s a way of showing that they are getting serious about the Asian asset side of their portfolio.”

Sustained interest rate hikes have raised borrowing costs, giving cash-rich buyers such as the QIA an advantage over investors who use debt to fund acquisitions.

“The expectation is that sovereign funds can get better deals now there’s less competition,” said Ziemba. 

Mohammed al Hardan, head of QIA’s technology, media and telecom investments, told Bloomberg the fund will further increase its tech investments, especially in China.

“Technology-focused investments will be an important part of any diversified SWF, but lots of investors have been burned by technology companies,” said Mogielnicki.

“Even the top-tier tech multinationals from the US aren’t necessarily seen as sure bets these days.”

Changing approach

Established in 2005, the QIA’s domestic holdings include stakes in Qatar National Bank – the Middle East and Africa’s biggest bank by assets – and former telecom monopoly Ooredoo.

From the late 2000s onwards under former head Sheikh Hamad Bin-Jaber al Thani, Qatar’s ex-prime minister, the QIA made global headlines buying multibillion-dollar stakes in the likes of banking group Barclays, British supermarket chain Sainsbury’s, and automaker Volkswagen.

Since Sheikh Hamad’s departure from the QIA following the abdication of Qatar’s former emir Sheikh Hamad bin Khalifa al Thani in 2013, the fund has tended to make smaller, lower-profile investments. It has also announced a flurry of tech-oriented deals over the past 18 months.

In June the QIA was part of a 255 million euro ($275.4 million) investment in German biotech company ITM Isotope Technologies Munich SE, while in May the authority increased its stake in Turkish online marketing platform Insider.

The same month, QIA led a $250 million investment round into London’s Builder.ai, an AI-powered software developer.

“Although QIA specified Asia and the US, it’s still also seeking investment opportunities in Europe particularly in clean energy,” said Ziemba.

The QIA is keen on further investments related to infrastructure, digitalisation and combatting climate change, Bloomberg reported.

“Most investment has to have a tech aspect, whether that’s in agriculture or real estate,” said Ziemba.

Qatar wants to both make returns on its investments and enable technology transfer to the country.

“QIA and other sovereign funds invest on five or 10-year timeframes – it will also do opportunistic deals, but isn’t necessarily looking for a quick return,” said Ziemba.

QIA in February joined a new, $1.5 billion US private equity fund that will buy into “mid-market” companies with revenue of $100 million to $1 billion.

In January, QIA invested $150 million in The North Road, a Los Angeles-based film and television production company. The same month, it also bought into US genomics medicines firm Ensoma.

Its 2022 deals include investing in Nasdaq-listed BioXcel Therapeutics, Indian food app Swiggy, payments provider Checkout.com, and US biopharmaceutical company Ventus Therapeutics.

Like many other Gulf countries, Qatar is trying to avoid having to choose between US and Chinese technologies.

“QIA has a sizable pool of capital,” added Ziemba. “It has been wanting to invest more in China for some time, but paused some investments after China’s government imposed some technology restrictions and also because of uncertainties over the domestic economic impact of its zero-Covid policies.”