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Wed 3 Oct 2007 09:52 AM

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Qatar fund cuts dollar exposure

Qatar Investment Authority has cut its exposure to dollar by half to 40% in past two years, premier says.

Qatar's $50 billion sovereign wealth fund has cut its exposure to the dollar by more than half to around 40% of its portfolio in the past two years, the country's prime minister said in an interview aired on Tuesday.

Around 40% of the Qatar Investment Authority's portfolio was invested in euros and another 20% in currencies including sterling, Prime Minister Sheikh Hamad bin Jassim bin Jabr al-Thani told CNBC television.

"Before we are almost 99% in dollars. Since two years we are 40% dollars," said Sheikh Hamad, who also heads the QIA.

"This is because all our income from oil and gas comes by dollars. So we need some other windows," he said, explaining the diversification policy. Opec member Qatar has the world's third largest gas reserves.

Asked whether the QIA intended to reduce its exposure to the US dollar further, Sheikh Hamad said "Not at the moment, no."

Last month, Kenneth Shen, the QIA's head of private equity said in Dubai it was diversifying away from the weakening US dollar by investing more in Asia.

The QIA, which has offered to buy British supermarkets chain J. Sainsbury, is eyeing investments in countries such as Japan, China, South Korea and Vietnam, he said.

Sheikh Hamad also said the QIA wanted 40% of its assets in Asia.

Central banks in the Middle East, the world's largest oil-exporting region are reducing exposure to the dollar, which hit record lows against the euro and a basket of currencies on Monday.

The central banks of Qatar and the UAE said last year they planned to increase their euro holdings, while Kuwait's central bank dropped the dinar's peg to the dollar this year and adopted a basket of currencies to contain imported inflation.

Central banks manage only a fraction of region's reserves, swollen by the quadrupling oil prices in the last six years.

The QIA, which refuses to disclose the value of its portfolio, manages about $50 billion in assets, Washington-based Peterson Institute for International Economics estimated in a report in August.

The Abu Dhabi Investment Authority, which manages surplus revenues of the world's sixth-largest oil exporter, has at least $500 billion in assets, according to the report.

The Kuwait Investment Authority had about $213 billion on March 31, according to official figures.

Both the US Treasury and the International Monetary Fund said in June they were uneasy about the growing power of such sovereign funds within the world's financial system.

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