Trophy assets lose lustre as Qatar favours prudence

Qatar, owner of London landmarks the Shard and Harrods, is moving cash into exchange traded funds and index funds as part of a more “prudent” investment strategy, two people familiar with the investment strategy said.

The shift away from so-called trophy assets at the Qatar Investment Authority (QIA), the world’s ninth-largest sovereign wealth fund know as an aggressive deal hunter, makes it the latest high-profile convert to a low-cost, passive style of investment.

It follows a change of leadership in December 2014, when Sheikh Abdullah bin Mohamed bin Saud al-Thani was appointed chief executive of the country’s historically secretive sovereign wealth fund.

At the time, people familiar with the appointment said it would not alter the fund’s strategy. Now, however, those people said the QIA is exploring more ‘plain vanilla’ investment as it looks to diversify its holdings in light of low oil prices.

“A decade ago [Qatar] sought to buy property because they thought ‘at least in the worst-case scenario, we have something’,” a senior person familiar with the strategy said.

“After that the portfolio got bigger but [they] are still being very active but not in the magnitude that you saw before.” The person said a lack of trophy assets for sale is also contributing to a shift in strategy.

You cannot keep doing trophy buildings or buying 20 per cent in every single state because the opportunities are not there anyway

This is despite high-profile deals, such as the recent sale of London’s ‘Cheesegrater’ building to a Chinese property magnate. The person said: “You cannot keep doing trophy buildings or buying 20 per cent in every single state because the opportunities are not there anyway.

“What the QIA wants is to get into ETFs, get into indexes.”

Analysts believe Qatar is likely to be a less-engaged global investor in future as a result.

Professor Javier Capape at Madrid-based IE Business School said: “It is very plausible to see the change [in strategy as a result of] the new leadership and new low for longer oil prices. ”We won’t see such an active and engaged player [as before].”

He predicted Qatar will have “less foreign visibility in trophy assets and more alignments with domestic goals” and “lower for longer oil prices that would force some divestments to obtain liquidity”.

Qatar’s shift is part of a wider change in investment strategy among sovereign wealth funds as they become more experienced investors.

A report by IE Business School showed sovereign wealth funds moving away from luxury businesses, buying more hotels and increasing their allocations to private deals as they look to offset falling state revenue from lower oil prices.

Investment by national funds in businesses reliant on wealthy customers, including Tiffany, Porsche and LVMH, has fallen from $13bn in 2009 to just $1.4bn in 2015, the report revealed.