Qatar's sovereign wealth fund may regret spinning off part of its business
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 and Barclays . 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 US$3bn, 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 US$3bn 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 US$6bn.
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.