Secrecy of Qatar Investment Authority obscures reported loss of $12 billion in third quarter of 2015

Author and financial columnist Chris Wright doubts the accuracy of a report of Qatar Investment Authority losses.
Author and financial columnist Chris Wright doubts the accuracy of a report of Qatar Investment Authority losses.

The Financial Times reported a few months ago that the Qatar sovereign wealth fund, the Qatar Investment Authority (QIA), had suffered a $12 billion paper loss in the third quarter of 2015. 

Chris Wright, financial columnist and the author of "No More Worlds to Conquer," told Gulf News Journal due to the extreme secrecy of the fund's holdings it is unknown what impact the significant drops in stocks in  big corporations like Volkswagen, Glencore and Agricultural Bank of China and — almost all of which had a bad third quarter in 2015 — had on the country's investment fund.

“The problem is that the QIA doesn’t disclose its holdings, so we don’t know how other assets in the portfolio performed,” Chris Wright told Gulf News Journal.

The Financial Times’s report was based on the third quarter performance of some of its largest holdings, principally Volkswagen, which had been caught in the emissions scandal during the quarter. The Volkswagen holding alone accounted for $8.4 billion of the loss, but it had been a bad quarter for western companies generally, and Glencore, Siemens and others had also fallen heavily.

Concerning the reasons that the kingdom is reluctant to reveal its financial aspects — leaving it to open speculation over reportedly staggering losses — Wright said that since Qatar is not a democracy it does not have to disclose anything it does not want to. In democracies like Norway, which has the largest sovereign wealth fund in the world, there is very much a feeling that the assets of a sovereign fund belong to the people, and they expect to know exactly what is being done. Hence, Norway’s fund is exceptionally transparent and discloses its value down to the last kroner every minute of the day.

“In the Middle East, there is a different attitude; they still feel that the funds are managed for the state and its people, but there is a feeling that the state knows best and there’s no need to disclose anything if it doesn’t want to,” Wright said. “Additionally, it can be argued that transparency makes it harder for a big fund to get the best bargains and investments because if people can see exactly how it invests, they can try to mirror its approach.”

Wright said while QIA may have suffered a loss in the short-term they are likely more interested in the long-term investment strategy.

“Their real estate holdings probably did a lot better over the same period," Wright said. "On top of that, those are clearly not realized losses. Volkswagen fell heavily in (the third) quarter, but it had gone up for several years beforehand. In the end, sovereign wealth funds don’t care about quarterly performance. They are set up for generations ahead.”

Despite the high profile losses Wright still believes there is a promising financial prospect for QIA in 2016 even though it is a very difficult market for any investor. He said that there are serious concerns about all emerging markets – not just China – and although the U.S. is growing, there are very really very few economies or asset classes where people are unequivocally confident.

"Nevertheless, sovereign wealth funds are much better set up for these environments,” Wright said. “They can ride out the lows, wait until bargains arise, and then buy. The QIA has the potential to do that."

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Qatar Investment Authority

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