BREAKINGVIEWS- $12 bln Qatar fund adds new risk: public scrutiny

Wed Feb 20, 2013 12:17pm IST

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Refiles to fix location in dateline)

By Una Galani

DUBAI, Feb 19 (Reuters Breakingviews) - Qatar’s sovereign wealth fund may regret spinning off part of its business. The Gulf emirate known for snapping up high-profile stakes in publicly listed entities is giving ordinary investors a chance to get a piece of the action. That, though, opens up the absolute monarchy to one risk it loathes: public criticism.

Doha Global Investment, as the new fund is called, is Qatar’s latest asset-management foray – the sovereign fund has smaller joint ventures with Credit Suisse (CSGN.VX) and Barclays (BARC.L). Doha Global creates a new channel to redistribute Qatar’s hydrocarbon wealth as well as boost liquidity on the local exchange. And by partnering with Qatar Holding, which will seed the fund with $3 billion, it should have access to the world’s best investment opportunities.

So far, so good. But the aim is to match Qatar Holding’s stake with another $3 billion from Qatari nationals by a public stock offering. Foreign investors will also be allowed to buy a limited number of shares, probably once the fund goes looking for another $6 billion.

Bringing in such outside capital means Doha Global’s executives will have to answer to shareholders. They will also be held accountable to a board of directors, half of them from the private sector.

That’s far more scrutiny than Qatar’s investment fund – or its monarchy – is accustomed to and may cramp its style. Sovereign funds do well because they can move quickly, take big risks and adopt a long-term outlook. That may be harder to do with public shareholders and a board.

It has already succumbed to setting a target - Qatar is promising that Doha will pay a 5 percent dividend in the first year. Qatar is a shrewd dealmaker and claims to have delivered a 17 percent return last year. But its performance has been boosted in recent years thanks in part to making timely investments in distressed targets.

Generating such profit may be harder as markets recover - and any losses or controversies will be subject to public scrutiny. This new fund won’t allow Qatar to decide when to step out of the shadows.

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CONTEXT NEWS

- Qatar will create a $12 billion investment firm and list it on the local stock exchange, the country’s sovereign fund said on Feb. 19. The fund will be called Doha Global Investment.

- Qatar Holding - the investment arm of the Qatari sovereign fund - said the new firm will invest in assets in any sector around the world.

- "You name it - shares, bonds, real estate, private equity. We will look at every sector in every country around the world," Hussain al-Abdullah, Qatar Holding's vice chairman, said at a news conference.

- The sovereign fund generated a rate of return of 17 percent last year, Abdullah added.

- Qatar Holding will transfer $3 billion-worth of assets into the new firm, with a similar amount raised in an initial public offering on the Qatar Exchange. A further $6 billion will be raised at a later date.

- Qatar Holding will own 50 percent of the fund, with the rest floated on the stock exchange. The firm will have a nine-member board, including a chairman.

- Reuters: Qatar to list $12 bln firm with assets from wealth fund [ID:nL6N0BJ6S8]

- For previous columns by the author, Reuters customers can click on [GALANI/]

(Editing by Antony Currie and Emily Plucinak)

((una.galani@thomsonreuters.com))

((Reuters messaging: una.galani.thomsonreuters.com@reuters.net)) Keywords: BREAKINGVIEWS QATAR/

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