Qatar Wealth Fund's Expansion Undeterred by Brexit, Trump

(Bloomberg) -- Qatar’s sovereign wealth fund plans to expand in the U.K. and the U.S., as top officials said long-term commercial opportunities would outweigh political uncertainty roiling the two countries.

The gas-rich Gulf emirate will add 5 billion pounds ($6.3 billion) to its U.K. portfolio in the next three to five years, and will set up an office soon in San Francisco -- its second in the U.S. after New York. The focus will be on infrastructure, technology, healthcare and real estate, they said.

The plans were announced on Monday in London, and the investments could help signal that the U.K. remains an attractive destination for foreign capital even after it leaves the European Union. Prime Minister Theresa May is set to begin the two-year clock on Brexit negotiations on Wednesday.

“We look at our investments purely on a commercial basis,” Finance Minister Ali Shareef Al Emadi told Bloomberg Television’s Nejra Cehic in an interview, responding to a question on whether turbulent Brexit talks would change Qatar’s view. “We were heavily investing in the U.K. and Europe during the financial crisis. Most of our investments are very much long-term.”

Qatar, the world’s biggest exporter of liquefied natural gas, is already a major investor on both sides of the Atlantic. It has assets valued at more than 35 billion pounds in the U.K., including London landmarks such as the Harrods department store, The Savoy hotel and the Shard skyscraper. The Qatar Investment Authority has also invested more than 60 percent of the $35 billion dollars it has dedicated to the U.S.

“Qatar realizes that due to its large capital base and relative small size of its economy, there are constraints to what it can do inside the country,” said John Sfakianakis, director of economic research at the Gulf Research Center Foundation in Riyadh. “It makes sense to invest in countries that will produce long-lasting and stable returns.”

More than 400 Qatari officials and executives are in the U.K. for the two-day investment forum, led by the prime minister, as well as bankers from the some of the world’s top financial institutions. The event moved to Birmingham on Tuesday, where British companies were due to “showcase high-profile investment-ready projects,” according to a statement released earlier this month.

Vested Interest

Qatar has a stake in keeping the U.K. economy and asset prices strong during and after Brexit. It delivers 90 percent of the U.K.’s imports of the fuel. The emirate invested billions in Barclays Plc during the global financial crisis and has built up a stock and real estate portfolio over the past decade.

The investments “are too small to make a significant difference” to the U.K. economy, said Ghanem Nuseibeh, founder of London-based consultants Cornerstone Global Associates. But he said the funds would still “reaffirm the attractiveness of the U.K. to Gulf investors, who see an opportunity to engage in a stronger way with the U.K. now that it is exiting” the European Union.

In a frank assessment of the uncertainty facing the U.K. due to Brexit, QIA Chief Executive Officer Sheikh Abdullah Bin Mohammed Bin Saud Al Thani said: “If you ask anyone here, they won’t have any clue at what’s happening in this economy.”

Yet the Qatari royal said the wealth fund still agreed to commit “a big amount of investment in the U.K., especially in infrastructure” during its last strategy session. “There is pressure from my board to diversify in terms of geography and asset class, but we are still looking, even after Brexit, for opportunities,” he said.

Holding Assets

Al Emadi, the finance minister, said the QIA and its units were also looking at opportunities in U.K. property, technology as well as energy, and dismissed the impact of the weakening pound on his country’s investments.

“Since we’re not trading in our portfolio, it’s always going to be an accounting adjustment,” he said. “If we look at what we’ve been holding in the last 10 years, we still have the same assets as of today and I don’t think we’re going to give up these assets” anytime soon, he added.

He also said his country would encourage any talks between the U.S. and the six-member Gulf Cooperation Council, which includes Qatar, to establish a free trade agreement after Brexit.

Monday’s announcement would maintain the U.K.’s status as Qatar’s top investment destination even as the QIA considers expanding in the U.S. The fund will open an office in San Francisco by the end of this year or the first quarter of next, Sheikh Abdullah told reporters.

Al Emadi said Qatar’s investments in the U.S. are “really ahead of schedule.”

“The U.S. market has done extremely well, especially after Trump’s election,” he said. “But the way we are look at this is more about the U.S. economic and financial policies.”

The $335 billion sovereign wealth fund, created in 2005 to handle the country’s windfall from liquefied natural gas, has stepped up the pace of investments as energy prices recovered, buying stakes in Turkey’s biggest poultry producer, Russian oil giant Rosneft PJSC and U.K. energy company National Grid Plc.

Qatar is also weighing whether to invest in a $100 billion global technology fund formed by SoftBank Group Corp. “We are studying the plan and have not made a final decision,” Sheikh Abdullah said.

--With assistance from Selcuk Gokoluk and Emma Graham

To contact the reporters on this story: Mohammed Aly Sergie in Doha at msergie@bloomberg.net, Alaa Shahine in Dubai at asalha@bloomberg.net, Dinesh Nair in London at dnair5@bloomberg.net.

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Stuart Biggs, Mark Williams