Mapping Qatar's Many State-Owned Funds

June 06, 2013 by Chris Wright

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MOST foreign bankers and fund managers who seek investment mandates from Qatar assume that sovereign wealth fund Qatar Investment Authority (QIA) accounts for all of the emirate’s outbound investment activity. But they’d be wrong. Just as new investment vehicles have sprung up alongside the Abu Dhabi Investment Authority (ADIA), new entities are constantly emerging in Qatar as the Arabian Gulf state seeks to diversify its hydrocarbon-based economy.

Today bankers have several doors to knock on, which is good and bad: They can approach a broader range of institutions than ever before, but keeping track of the roles and mandates of these new organizations is confusing. Understanding how they interact is crucial because many of Qatar’s ruling elite sit on multiple boards and management teams — suggesting that power remains concentrated with a handful of people — and because the various entities serve distinct functions.

QIA still occupies pride of place as the emirate’s most powerful state-owned investor. Although it publishes little on its investment strategy or holdings, its bold approach to the world is no secret. More than any other sovereign wealth fund (with the possible exception of Singapore’s Temasek Holdings), QIA pursues direct investments. It favors trophy luxury brands, prime real estate, commodities and — since the financial crisis — banks. But ascertaining QIA’s total firepower is challenging because the fund doesn’t publicly disclose its assets under management. Speaking at at a 2012 conference in Doha, the Qatari capital, director Hussain al-Abdulla revealed only that the fund managed "much more" than $100 billion. The Sovereign Wealth Center conservatively estimates QIA’s assets to be closer to $135 billion.

Al-Abdulla is the Qatari executive whom most bankers want to meet. Although he officially ranks third in QIA’s hierarchy, he is understood to be the fund’s key decision-maker. The crown prince of Qatar, Sheikh Tamim bin-Hamad bin-Khalifa al-Thani, serves as QIA’s chairman, but his role is largely political. The emirate’s prime minister, Sheikh Hamad bin-Jassim bin-Jabr al-Thani, acts as vice chairman and CEO — and is reported to be more closely involved than Sheikh Tamim — but takes less responsibility for the fund’s portfolio than al-Abdulla.

QIA has two important subsidiaries, Qatar Holding and Qatari Diar. Asset managers suggest that Qatar Holding represents as much as 80 percent of QIA’s business and conducts most of its real estate and bank investments. Qatar Holding’s wide range of investments aligns with QIA’s known enthusiasm for particular sectors. For example, Qatar Holding manages the bulk of allocations to financial services firms, including stakes in Agricultural Bank of China, Barclays, Credit Suisse, Grupo Santander Brasil. It also has substantial minority stakes in Canary Wharf Group, J Sainsbury, Hochtief, Lagardère, Porsche Automobil Holding and Volkswagen — and owns London-based luxury services group Harrods outright.

It’s no surprise that many consider Qatar Holding and QIA synonymous, given that the prime minister, Sheikh Hamad, is chairman of Qatar Holding and CEO of QIA. Al-Abdulla, who effectively runs QIA, is vice chairman of Qatar Holding, although its managing director and CEO is Ahmad Mohamed al-Sayed (who is also secretary to the board and vice chairman of Doha-based stock market operator Qatar Exchange). Other board members of QIA and Qatar Holding include Sheikh Abdulla bin-Saoud Al-Thani, governor of Qatar Central Bank, and Yousef Hussain Kamal, minister of Economy and Finance. Still, the two organizations are legally distinct.

Gaining access to QIA is difficult. A number of external asset managers grumble privately when they talk about trying to work with it. "There’s nothing there for us," says one international fund manager. As another explains, "QIA is a difficult entity to deal with — the interaction is very strange and sporadic." A third is even more dismissive. "I have a contact there and it’s like blowing in the wind whether they’re going to answer me or not," he says.

But contrary to such opinions, QIA invests in mainstream liquid assets like equity and fixed income, and is believed to have as many as 20 in-house experts investing directly. The fund also has a division of strategic and private equity.

Managers who have worked closely with QIA are quick to point out its fierce efficacy. The lack of an explicitly described asset allocation benchmark does not equate to naïveté. "You would never, ever want to be negotiating anything with the QIA’s managers," says one who knows firsthand. "They are among the worst you will ever come across from a seller’s point of view. There are few other buyers in the world that will squeeze as hard as they do, and if they get their way — and their strategy works — they are good investors."

Qatari Diar, QIA’s second-most-familiar subsidiary, has a more clearly differentiated mission. Whereas QIA and Qatar Holding often buy stakes in completed landmark buildings such as London’s 1 Cabot Square (home to Credit Suisse), Qatari Diar is a developer. Established in 2005 by QIA, it initially coordinated Qatar’s own real estate development priorities (a mandate that expanded to the nation’s railways in 2009), but it now operates in at least 29 countries. Lusail City is Qatari Diar’s flagship project, but the developer’s reach now extends to the U.K., Europe and the U.S., including London’s Chelsea Barracks and Washington D.C.’s CityCenterDC. In the Middle East and North Africa, Qatari Diar has projects in Palestine and Yemen.

Again, there are personnel overlaps. Economy and Finance minister Kamal, who also serves on the boards of QIA and Qatar Holding, is chairman of Qatari Diar. Its CEO is Mohammed bin-Ali al-Hedfa, who was previously deputy CEO of business development for Qatari Diar and CEO of Lusail Real Estate Development Co.

Within QIA, subsidiaries exist within subsidiaries. Launched in 2008, Doha-based Hassad Food, part of Qatar Holding’s portfolio, operates as a global investor to generate profits and help reinforce Qatar’s food security. Hassad, which takes a long-term view of agribusiness and food production (and claims to have an investment horizon of up to 100 years), often invests in start-ups and greenfield projects through joint ventures or direct acquisitions. It has a subsidiary, Hassad Australia, that focuses on agricultural land. Nasser Mohamed al-Hajri, perhaps best known as Qatar’s representative to the World Bank and the International Monetary Fund, serves as Hassad’s chairman. In April the company appointed a CEO, Fahad Abdulla Turki al-Subaiey, who was previously an executive director for energy powerhouse Qatar Petroleum International (QPI).

The most visible state-owned organization outside of QIA is the Qatar Foundation for Education, Science and Community Development, which was launched in 1995 to nurture future leaders. Bankers and asset managers sensed the foundation starting to take a broader role after the government published Qatar National Vision 2030 in July 2008; this policy statement clarified the emirate’s plans to diversify its hydrocarbon-based economy by promoting technological innovation. "National Vision 2030 gave Qatar Foundation an exciting mandate," the organization’s literature states. "It is the engine driving the development of Qatar’s people."

In late 2010 the Qatar Foundation created an investment fund, the Qatar Foundation Endowment, to support the foundation in perpetuity. Two Western asset managers, Carl Bang, who was previously chairman and CEO of State Street’s business in France, and Stefan Cowell, previously CIO of the Abu Dhabi Retirement Pensions & Benefits Fund, are leading the effort to build the fund. According to one international asset manager, Bang is working as the endowment’s CIO and Cowell is its head of asset management. The foundation itself is not willing to confirm their roles but points to Rashid al-Naimi as its as chief executive. "I don’t know if they’re yet putting money to work," says the manager, who has had contact with Bang and Cowell, "but it appears to be getting going."

The clearest evidence emerged in June, when the Qatar Foundation Endowment injected $1.27 billion into Indian telecommunications company Bharti Airtel, taking a 5 percent equity stake in the company. The public announcement accompanying the Bharti deal described as "a long-term global investor with a broad mandate to make direct and managed investments." The endowment was established, the announcement continued, "to provide a sustainable income stream that will ultimately fund [the Qatar Foundation’s] operations in perpetuity."

The top levels of Qatar’s royal family are more publicly linked with the Qatar Foundation than the emirate’s other investment vehicles. Sheikha Moza bint-Nasser al-Missned, the second and most prominent wife of the emir, serves as its chairperson. Kamal, the minister of Economy and Finance, is also a board member. Mohamed Saleh al-Sada, minister of Energy and Industry, Sheikha bint-Abdulla Al-Misnad, president of Qatar University, crown prince Sheikh Tamim and Sheikh Jassim bin-Abdulaziz al-Thani, minister of Business and Trade, also serve on the foundation’s board of trustees.

Bankers and asset managers are watching the foundation’s evolution with interest, although it appears to be in its formative stages. People close to the foundation say its endowment has no set quota for particular sectors or assets, for example, but it does have a long-term focus and a mandate to make direct and indirect global investments. "Qatar Foundation is in the early stages of developing its investment capabilities, says Akber Khan, head of asset management for Doha-based investment bank Al Rayan Investment. "Its ambitions are significant ­and it is certainly an investor to watch."

"It is on our radar now, but I would have thought it is going to invest directly, like the QIA," notes an external asset manager. "I don’t think it’s any more likely to be allocating to third-party asset management than QIA."

A third state investor is Qatar’s state-owned energy corporation, Qatar Petroleum. It has a strategic investment subsidiary, QPI, which was established in 2006 to invest in a range of energy ventures from gas and power extraction to petrochemical refinement. QPI chief executive Nasser Khalil al-Jaidah has said he wants the organization to have a 50-50 balance of upstream and downstream projects. "These lofty goals," he states in an official communiqué, "can only mean one thing — entering the big league and dealing with the major multinationals."

Top names overlap at QPI too. Minister of Energy and Industry al-Sada, who sits on the board of Qatar Foundation, serves as QPI’s chairman.

Several of QPI’s projects are publicly known, among them a partnership with Paris-based global energy company Total and the Algerian International Petroleum Exploration and Production Corporation (Sipex) in Mauritania; a petrochemical joint venture with Anglo-Dutch global energy company Royal Dutch Shell in Singapore; and three liquefied natural gas (LNG) receiving terminals in Italy, the U.K. and U.S. In May, QPI announced it would acquire shares in Total’s venture in Congo.

QPI behaves much like other major oil companies, expanding into new markets to diversify its revenue streams, but it also obeys a mandate to diversify the nation’s economic base. In that regard it is similar to some of Abu Dhabi’s investment vehicles and most closely resembles that emirate’s International Petroleum Investment Co., better known as IPIC.

Qatar Petroleum has another subsidiary, Industries Qatar, founded in 2003 and partly listed on the Qatar Stock Exchange. The group is 51 percent owned by the parent company and 49 percent owned by public shareholders — most notably Qatar’s General Retirement and Social Insurance Authority, which holds a 20 percent stake. At first glance, Industries Qatar resembles any other diversified energy conglomerate, but its high level of pension ownership in a country where pensions are still in their infancy makes it something of a mechanism for local wealth redistribution. Industries Qatar wholly owns Qatar Steel and is a majority shareholder in at least three joint ventures: Qatar Petrochemical Co., (with Total), Qatar Fertilizer Co. (with Oslo-based global agricultural products supplier Yara International) and Qatar Fuel Additives Co. (with several partners, including Industries Qatar, U.S. government development finance institution Overseas Private Investment Corp (OPIC), and Dubai-based International Octane (part of Dubai’s Dutco Group)). Al-Sada is chairman and managing director of Industries Qatar in addition to serving as chairman of QPI and trustee of the Qatar Foundation. QPI chief executive Nasser Khalil al-Jaida is on Industries Qatar’s board.

Another state-owned group, Qatar Mining, appears to be legally separate from QIA and Qatar Petroleum, although it does have a joint venture with Qatar Steel. Qatar Mining is reported to have signed agreements for exploration in the Democratic Republic of the Congo, Republic of Sudan and Bulgaria, among other places, either in its own name or through its wholly owned subsidiary Tadeen Cyprus. It also has a stake in Indonesian group Southern Arc Minerals. Qatar Mining’s CEO, Mohammed al-Shahwani (who is also a director of Southern Arc), worked at Qatar Petroleum and Qatari Diar before joining the company in late 2010.

More confusion arises when eminent Qataris make investments through new single-purpose vehicles. Sometimes it’s easy to connect the dots: Three Delta, for example, which was set up in 2005 by QIA and British businessman Paul Taylor to invest in U.K. health care and real estate (and dissolved in 2011), spawned two new investment entities, Delta Two, which gained prominence in 2007 when it sought to buy Sainsbury; and Instow, which made headlines when it tried to buy U.K. house builder Bellway. But the obvious counterexample is Qatar Holding’s initial purchase of a stake in Barclays in June 2008. The fund bought a 7.7 percent of the U.K. bank, but a little-known special-purpose vehicle called Challenger Universal, which represented Sheikh Hamad, among others, also bought a stake of 1.86 percent.

Then there’s state-owned Qatar Luxury Group, created in 2008 "to build and foster luxury brands in the fashion, hospitality and lifestyle sectors for an international audience," according to its own literature, and chaired by Sheikha Moza. Although several familiar names appear on its board, the group has a rare foreign CEO, Gregory Couillard, a veteran of LVMH Moët Hennessy – Louis Vuitton (better known as LVMH). Qatar Luxury Group recently took an an 85.7 percent stake in leather goods company Le Tanneur & Cie.

Who owns French football team Paris Saint-Germain F.C.? Not QIA, Qatar Holding or the Qatar Foundation, but Qatar Sports Investments (QSI), which was founded in 2005. Designed to develop Qatar’s sport, leisure and entertainment sectors, QSI "may act independently or with investment partners," according to its website. The company also facilitates investment in Qatar, and its chairman, former pro tennis player Nasser Ghanim al-Khelaifi, is president of Paris Saint-Germain. In 2022, Qatar will host the The Fédération Internationale de Football Association (FIFA) World Cup. However it fits into the matrix of state-owned companies, QSI now wholly owns Saint-Germain and helped arrange Qatar Foundation’s sponsorship of FC Barcelona’s jerseys. QSI also owns several leisure clubs and resorts in Qatar and an international premium sportswear brand, Geneva-based Burrda Sport, launched in 2007.

As sovereign institutions and state-owned companies proliferate in Qatar, it’s worth remembering that a small group of royals tends to control them. "Ultimately, the country is under the leadership of the emir, so all of these institutions come under him," says one Qatari banker. "They may have different people who manage them, or different mandates, but they are all on each other’s boards and they all report to the top."

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