Qatar fund rebounds somewhat after huge losses

The Qatar Investment Authority recently regained some of the ground it lost after taking serious hits on investments in a troubled car giant and a commodities trading firm.

The sovereign wealth fund has doubled down on its relationship with Swiss-based Glencore, entering into a partnership on a controversial deal with Russian energy giant Rosneft.

Just over a year ago, the state-run fund reportedly lost $5.9 billion in just 10 days from its large stakes in Volkswagen and Glencore, the Swiss-based commodity trading and mining company.

Shares in Volkswagen and Glencore have recovered, though six executives at Volkswagen -- in which the Qatari fund was until recently the third-largest shareholder -- now face criminal charges in connection with a diesel emissions cheating scandal. Volkwagen has agreed to pay $4.3 billion in fines and penalties.

The German car company closed the week 149.55, up from a low of 92.36 in October 2015, when the Qatari fund reportedly lost $4.8 billion from its investment.

Over the same 10-day period, the fund lost $1.1 billion from its stake in Glencore, which saw its share price drop to a low of 73.50. It closed last week at 316.64.

“Glencore had a near-death experience, but it has rebounded," Craig Pirrong, a finance professor and global energy expert at the University of Houston, told the Gulf News Journal. "Volkswagen continues to crater.”

Pirrong, the director of the university’s Global Energy Management Institute, has been tracking the Rosneft deal, which gives the Qatar Investment Authority and Glencore a 19.5 percent stake worth $10.2 billion.

The oil giant is closely linked to the Kremlin and Russian President Vladimir Putin. Observers describe the deal as a triumph for Putin as his country struggles to deal with sanctions imposed following the invasion of Crimea and interference in Ukraine.

Putin said in October 2016 that Rosneft might buy back its own shares and sell them later if it could find an outside partner.

“This is also a major win for Rosneft that avoids going through a ridiculous self-privatization exercise,” Luis Saenz, head of equity sales and trading at BCS Financial Group in London, said in a note, according to Bloomberg. “Most importantly, a massive positive for Russia that’s moving closer to breaking the sanction/isolation regime.”

In a December 2016 statement, Rosneft said all sides, “including Rosneftegaz and the consortium of foreign investors – one of the world’s largest sovereign funds, Qatar Investment Authority, and a leading Swiss commodity producer and trader Glencore – as well as financial and legal consultants, financial institutions and creditors, have finalized all corporate and technical closure and payment procedures.”

Pirrong said that although the Qatari fund has a history of investing in Glencore, this is the first partnership of the this kind that he is aware of, and described it as having “geopolitical ramifications.”

He called details “opaque” and concluded that a lot of “financial engineering” has gone on. He noted that the Qatar Investment Authority has been “totally silent on the deal.”

Since the investment authority has pledged to invest $35 billion in the United States, Pirrong said that the wealth fund is unlikely to face any serious security evaluations by U.S. authorities.