A sovereign wealth fund is not built to make money. It is meant to hold value and uphold the values of the country whose wealth it holds. But Qatar, whose government is now under severe pressure from its Arab neighbors (allegedly for supporting Iran and terrorism), has taken this to a whole new level.
And what equities! Aside from the Qatar National Bank, its biggest holding is $12 billion worth of Volkswagen AG (ADR) (OTCMKTS:VLKAY), whose 10-year return now trails even Ford Motor Company (NYSE:F), thanks to its widely-publicized Diesel-gate pollution scandal.
The next biggest position in its portfolio? Rosneft Oil Co. (OTCMKTS:RNFTF), the Russian oil company, which is down 35% over the past five years.
If the Qatari investment manager offers to invest your retirement account for you, run away.
Saving Everyone Else
Qatar has been the world’s “sucker money” for many years now. It was relied upon during the 2008 financial crisis. It is dangled like a carrot on issues like President Trump’s infrastructure plans or Brexit. It’s the grease that keeps many western financial issues from becoming catastrophes.
But is that money really going to come in when its so-called allies abandon it?
The issue that caused the cut-off of Gulf relations is said to be Qatar’s support of Islamist groups, like the Islamists who won Egypt’s only free and fair election after the Arab spring. Qatar is condemned for supporting Iran, which just had yet-another election, supporting the reform government of Prime Minister Rouhani.
The President’s own tweets support the Saudi position, while other Administration officials rhetorically minimize the anti-Qatar tilt:
During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology. Leaders pointed to Qatar – look!
— Donald J. Trump (@realDonaldTrump) June 6, 2017
There’s an assumption that Qatar could end the crisis by closing Al Jazeera, the only major news source in the Arab world with any independence. But this is a financial column.
What Could Qatar Buy?
One of the fund’s few winners is HK Electric Investments Ltd., up by one-third since going public in 2014. Maybe the fund would like to try some other Chinese stocks, like Tencent Holdings Ltd (OTCMKTS:TCEHY) or Alibaba Group Holding Ltd (NASDAQ:BABA)?
Perhaps, instead of owning $2.8 billion of Barclays PLC (ADR) (NYSE:BCS), down 40% in the past two years, it might want to put some money into the $100 billion investment fund being put together by Softbank Group Corp (OTCMKTS:SFTBF)?
Past mismanagement, in a financial sense, means Qatar could only buy one-third of Apple Inc. (NASDAQ:AAPL), but there’s plenty of money to take a position in other high-flying American tech stocks, like Nvidia Corporation (NASDAQ:NVDA) or Qualcomm, Inc. (NASDAQ:QCOM). Let the Saudi princes own a big hunk of News Corp (NYSE:NWSA). And wouldn’t the Qataris prefer being on the board of Facebook Inc (NASDAQ:FB)?
I did find one interesting investment in the Qatari portfolio. It apparently owns a big stake in Vistra Energy Corp (NYSE:VST), which went public last week. Vistra is what emerged from the bankruptcy of TXU Energy, the huge Dallas utility and Luminant, the state’s largest power producer. They are reportedly eyeing Dynegy Inc. (NYSE:DYN), and the combination would control 47 GW of generating power, about 13% of the U.S. 340 GW baseload by my calculation.
The point is that, while sovereign funds like those of Qatar are run on political principles, they don’t have to be. If a country wanted to make money with its money, and not retain political influence that often proves useless in a crunch, there are lots of places it can go. And if the fund were growing, rather than shrinking, it might even enhance that nation’s political power.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing, Dana Blankenhorn was long F and FB stock.