Asset AllocationJune 16, 2014

How the ‘Deal-Hunter’ Qatar Investment Authority Became Introverted

The $175 billion sovereign wealth fund is expected to become more conservative, according to a Switzerland-based think tank.

Reported by Featured Author

(June 16, 2014) — The Qatar Investment Authority (QIA)’s asset allocation behaviors are becoming more conservative to fall in line with the nation’s economic development agenda and stronger presence in the region, according to GeoEconomica.

The Geneva-based political risk management firm said the once “aggressive deal hunting” sovereign wealth fund—guided by former CEO Sheikh Hamad bin Jassim bin Jaber al-Thani—had been less active during the past few months, passing on opportunities such as Deutsche Bank’s recent capital increase.

“The modi operandi of most sovereign wealth funds, in one way or another, mirror the political cultures and ambitions of the governments that own them,” the report said. “Qatar’s international position has most recently come under significant pressure and the Doha has to deliver on a massive economic development program over the coming decade.”

The report said Qatar’s foreign policy saw a major change when the Arab Spring unfolded. Instead of partaking in mediation efforts previously carried out by the nation, it backed its foreign operations with up to $20 billion in commitments to Arab countries in transition.

In addition, the Doha’s recent move to put Qatar on the map as a global hub also began straining the nation’s relationships with its neighbors—with spillover effects on the $175 billion fund’s future investment policy, GeoEconomica said.

“Given Qatar’s economic development agenda for the years ahead, any sensible sovereign wealth investment policy will necessarily have to factor in the uncertainties and risks that the country is and will be exposed to in a tense geo-economic space,” the report said. “Qatar’s more exposed international position today might result in QIA taking a more holistic investment approach in the future.”

The firm hypothesized that QIA would operate as a more institutional investing entity with less of a political agenda by observing the following:

1) QIA may have to commit its investment policies more closely to the Santiago Principles—the generally accepted principles and practices for sovereign wealth funds—positioning it well in the international realm of investors.

2) The Qatari government may have to determine what role QIA will play in diversifying the national economy, particularly if and how QIA may contribute to securing investments outside the energy sector.

3) QIA may have to serve as a “substantial financial buffer” alleviating the impact of a number of risks that could affect the nation: slower growth in developed and emerging markets; a rush of market volatility; potential financial stress in the Eurozone; a decline in oil and gas prices; and increased geopolitical tensions.

“It is probably that sense of new realism that should determine QIA’s investment behavior over the coming years,” the report said.