Investment Strategy

Qatar sovereign wealth fund suffers $12B paper loss

Ben McLannahan
View of Doha's skyline
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Qatar's sovereign wealth fund has had a quarter to forget — suffering as much as $12 billion of losses on Volkswagen, Glencore and Agricultural Bank of China, three of the biggest equity investments of its roughly $250 billion fund.

With two days of the third quarter to go, the Qatar Investment Authority is likely to be nursing losses on eight of its top 10 holdings, according to Financial Times calculations based on Bloomberg compilations of regulatory filings.

The biggest hit could be a paper loss of about $8.4 billion on the QIA's stakes in the common and preferred shares of Volkswagen, the German carmaker embroiled in an emissions-testing scandal.

The fund's 8.2 per cent stake in Glencore, the trading house sagging under a mountain of debt, is another big loser, down about $2.7 billion since the beginning of the period. A slump in the Hong Kong-listed shares of Agricultural Bank of China has added another $650 million of marked-to-market losses.

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The QIA has emerged as one of the world's most assertive investors since it was founded by the Gulf state in 2005 with a mandate to use the country's gas riches to invest in a diversified portfolio of long-term holdings.

Other core holdings losing ground since July 1 are in Royal Dutch Shell (down about $500 million), Barclays ($240 million) and Siemens ($310 million). Just one of the top 10 stakes had a positive quarter — Vinci, the French construction company, up about $200 million — while Iberdrola, the Spanish utility, was flat.

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The QIA declined to comment on the swings in stock prices, or the size of the fund's stakes.

"It's one of the downsides of direct investing, when idiosyncratic risk goes against you," said Michael Maduell, president of the Las Vegas-based Sovereign Wealth Fund Institute.

The rocky quarter comes as the Doha-based fund — the ninth biggest in the world by total assets, according to SWFI estimates — opens its first office in the US. The fund, which has invested about $7 billion in the US to date, is now aiming to do five times as much over the next five years, principally in the infrastructure, technology and real estate sectors, according to people familiar with its plans.

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Some of the biggest names on Wall Street rubbed shoulders at a launch event on Sunday evening, including Stephen Schwarzman, chief executive of Blackstone, BlackRock chief Larry Fink, Citigroup chief executive Mike Corbat and Bill Ackman, head of Pershing Square, the hedge fund.

Having "boots on the ground" in New York should allow better management of a growing portfolio, said Sheikh Abdullah bin Mohamed bin Saud Al Thani, chief executive of the QIA, during a brief speech at the event at the St Regis Hotel.

Penny Pritzker, US commerce secretary, hailed Qatar's "unambiguous sign of confidence" in the world's largest economy, a month ahead of the first US-Qatar economic dialogue, to be held in Washington.