Qatar is planning a $12 billion fund to invest in distressed assets just as the world economic recovery signals such opportunities may be harder to find.
Global growth will increase 4.1 percent this year from 3.6 percent last, according to International Monetary Fund data. Equities are rallying, with the S&P 500 gaining 7.3 percent so far this year, the FTSE 100 rising 8.2 percent and the Nikkei 225 up 10 percent, according to data compiled by Bloomberg.
Qatar said yesterday that the new fund, to be called Doha Global Investment, will receive about $3 billion in assets from Qatar Holding LLC, a unit of the country’s wealth fund, and seek to raise the same amount in a share sale to nationals. The Persian Gulf emirate is using wealth from the world’s third-largest gas reserves to acquire assets across the globe.
“Given current low global rates, tight spreads and low volatility, only terrible or European companies now fit in the distressed bracket with significant capital already chasing distressed assets,” said Emad Mostaque, a strategist at Noah Capital Markets in London. “It doesn’t look like an ideal area for investment in the near future.”
Qatar Holding, the foreign investment arm of Qatar Investment Authority, agreed with Credit Suisse Group AG in November to form asset manager Aventicum Capital Management to boost investments in emerging markets.
Doha Global Investment will buy assets including real estate, bonds and equities, Hussain Al Abdulla, board member at Qatar Investment Authority, said yesterday. The fund sees investment opportunities in distressed assets in the next decade, said Aladdin Hangari, head of adviser Credit Suisse in Qatar that will advise on the creation of the fund.
“The period of acute distress seems to have passed,” said Simon Williams, Dubai-based chief Middle East economist at HSBC Holdings Plc. “Some assets have already refloated.”
The Middle Eastern nation last year pushed Glencore International Plc to boost its offer for Swiss miner Xstrata Plc in a $31 billion deal. It also bought U.K. luxury-good store Harrods for 1.5 billion pounds ($2.3 billion) in 2010 and holds stakes in companies ranging from Barclays Plc to Agricultural Bank of China Ltd. and retailer J Sainsbury Plc. Qatar boosted its stake in Tiffany & Co., the world’s second-largest luxury jewelry retailer, to 8.7 percent at the end of last year from 7.8 percent stake.
“The world economic crises will create opportunities for a long time, the next ten years,” Credit Suisse’s Hangari said. The financial crises of 2008 and the debt crises in Europe “will help in finding investment opportunities.”
Distressed assets can always be found whatever the business cycle, said Philippe Dauba-Pantanacce, London-based economist at Standard Chartered Plc. “Sometimes it becomes precisely a great opportunity for an entity that has the financial fire power in environments where financing could be tight -- and that’s where and when Qatar hope to play a role.”