Government-owned funds in the Gulf have made a number of headline-grabbing investments in struggling western institutions during the financial crisis and are now eyeing strategic stakes in BP as it looks to avoid a takeover after the Deepwater Horizon disaster. The investments have tended to come during rocky periods for the targets, along with a promise from the suitors to invest patiently and not try to take over management or use their stakes for political leverage.
The largest deals have been inked by the Abu Dhabi Investment Authority (ADIA), one of the world's biggest sovereign wealth funds, the Kuwait Investment Authority (KIA) and Qatar Investment Authority (QIA). In some cases, the funds have exited deals profitably, as when ADIA and the QIA made billions of dollars last year unloading their investments in the British banking giant Barclays. Other deals have ended less satisfactorily. ADIA is in arbitration with Citigroup in New York over the terms of a US$7.5 billion (Dh27.54bn) stake it took in November 2007.
After ADIA's investment in Citigroup, the next major play by a Gulf fund in western markets came in early 2008: the KIA invested $3bn in Citigroup and $2bn in Merrill Lynch, the brokerage giant that was forced into a merger later that year with Bank of America. In December last year, the KIA said it had sold its Citigroup stake, booking a profit of about $1.1bn. In October 2008, Sheikh Mansour bin Zayed, Minister of Presidential Affairs, bought £5bn (Dh27.78bn) of Barclays securities that converted into shares.
The investment, along with an injection of about £1.7bn from the QIA, helped Barclays avoid a rescue from the UK government amid the strains of the financial crisis. The investment was later transferred to the Abu Dhabi Government-owned International Petroleum Investment Company (IPIC), which made about £1.5bn when it exited part of the investment in June last year. The QIA sold some of its shares for a profit but still owns about 6.76 per cent of Barclays, according to regulatory filings.
The investments in Barclays have been some of the funds' most successful to date. They have fared far better than investments in Citigroup, which has seen its shares plunge from above $30, when the investments were made, to below $4 today. While the sovereign funds' financial-sector rescues have attracted a great deal of attention, Gulf governments and their numerous investment arms have also been party to significant deals in other industries.
Aabar Investments, a company about 70 per cent owned by IPIC, has been one of the region's most active asset-buyers in the past year, acquiring a 9.1 per cent stake in the German car maker Daimler and 32 per cent of Virgin Galactic, Sir Richard Branson's commercial space flight venture. afitch@thenational.ae
