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.
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."