Qatar, Citic Plan to Start $10 Billion Investment Fund

Qatar’s sovereign-wealth fund, which controls more than $100 billion of assets, plans to set up a $10 billion investment venture with China’s Citic Group as it seeks to diversify from retail and property assets in Europe.

The two signed a preliminary agreement for the fund today, with the deal to be completed in coming months, Ahmad Al-Sayed, chief executive officer of the Qatar Investment Authority, told reporters in Beijing. Each will invest $5 billion.

Qatar plans to put as much as $20 billion into Asia in the next five years and expand offices in Beijing and New Delhi. It’s already invested billions of dollars in China and Asia this year, including in Citic, Alibaba Group Holding Ltd. and Hong Kong department-store owner Lifestyle International Holdings Ltd. as it seeks to move beyond trophy European assets such as London’s Harrods department store.

“They’re diversifying,” Bobby Sarkar, a Doha-based head of research at Qatar National Bank Financial Services, said today by phone. China “is eventually going to be the biggest economy and they’d like a bigger presence there.”

The QIA is an investor in Citic Capital Holdings Ltd., an alternative investment company backed by the state-owned Citic Group and China’s sovereign-wealth fund and focused on private equity in Japan, China and the U.S. and real estate in China.

Not Exiting

In 2010, the QIA bought $2.8 billion of Agricultural Bank of China Ltd. shares during its initial public offering. While the fund has trimmed its stake this year, Al-Sayed said today that it’s not exiting.

“We see real long-term investment potential in companies here in China,” Al-Sayed said. Besides the push into Asia, the Qatar fund will open an office in New York, he said.

In May, the QIA was among investors who bought $5.1 billion of shares in Citic Pacific Ltd., which was acquiring assets from its parent as part of China’s drive to restructure state-owned enterprises. In 2013, the fund hired Michael Cho, a former co-head of Asia mergers and acquisitions at Bank of America Corp., to help lead its dealmaking.

Qatar, the richest country in the world on a per-capita basis, has deployed its surplus income from liquefied natural gas exports into real estate, banks, and automakers. Qatar Holding LLC, the foreign investment arm of the QIA, has invested in luxury hotels in Cannes and Amsterdam as well buying stakes in Barclays Plc and Credit Suisse Group AG.

Glencore Shareholder

The fund is also the largest shareholder in commodities producer Glencore Plc with a 9 percent stake, and owns 17 percent of Volkswagen AG, making it the automaker’s third largest investor, according to data compiled by Bloomberg.

Deals in Europe may still continue. QIA’s chief executive said in February that Qatar will increase investment in the U.K. The fund agreed to buy HSBC Holdings Plc’s headquarters in London, the Financial Times reported last month, citing unidentified people with knowledge of the matter. That deal, if completed, would add to its real estate assets in the city, which include the Shard, western Europe’s tallest building.

Qatar’s sovereign wealth fund also holds stakes in domestic companies such as the country’s biggest lender, Qatar National Bank, and telecommunications provider Ooredoo QSC.

— With assistance by Aipeng Soo

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