Qatar Has ‘No Global Mission To Conquer The World’

RETURNS

Advisers and bankers working closely with the fund say deal selection is all about the internal rate of return (IRR).

“It’s 100 per cent about economics and zero politics. Many deals have been killed if they don’t make financial sense, even if they are politically beneficial. It all boils down to the IRR,” a banking source close to the fund said.

In a rare media briefing in February, Al-Abdulla said the average return in the past four years was around 13 per cent.

QIA does not disclose its targets, but a banker close to the fund said return on investments was 17 per cent in 2012. “They don’t benchmark against any index but they’re hoping to achieve more this year,” he said.

By comparison, the Abu Dhabi Investment Authority (ADIA), one of the world’s biggest sovereign wealth funds, said in its 2011 annual review that it made returns of 6.9 per cent on an annualised basis over a 20-year period as of Dec. 31, 2011.

CONCERNS

An improvement in market liquidity and sentiment has meant large private equity firms (PE) and pension funds are posing more competition for the kind of assets Qatar is interested in.

“We have seen them walk away from couple of situations recently because the sellers brought in PE firms. When market conditions improve, the strategy of bilateral talks and negotiating better terms always don’t work as there is always another buyer,” a Dubai-based banking source said.

Another potential concern is the concentration of power and decision making with a handful of people and the absence of a large pool of second and third level managers at the fund who have the authority to make key decisions.

All deals are approved by the board, which includes central bank governor Sheikh Abdulla bin Saoud Al-Thani, finance minister Yousef Kamal and is chaired by Prime Minister Sheikh Hamad bin Jassim Al-Thani.

Ahmad Al-Sayed, managing director and chief executive officer of Qatar Holding, is another key decision maker.

“If the deal hits the $5 billion mark or more then it goes to the Emir and crown prince for blessings,” one source said.

Despite the concerns, the fund’s appetite for deals is only seen increasing in the coming years as it builds out a portfolio spanning several sectors and regions.

“Qatar has been very active and will continue to be active going forward. They are very smart and sophisticated investors and are very focused on what they do,” said Elif Bilgi, country head for Turkey and co-head of emerging markets investment banking at Bank of America Merrill Lynch.