Qataris count heavy cost of share collapse

VW and Glencore losses wipe off billions

DESPITE owning vast swathes of prime London real estate and big stakes in some of the world’s biggest companies, Qatar’s £165bn sovereign wealth fund tries its best to operate below the radar.

The notoriously secretive Qatar Investment Authority (QIA) does not publish accounts, meaning it is impossible to gauge exactly what it owns and how its investments are performing.

But it is easy to imagine Sheikh Abdullah bin Mohammed Al Thani – the Qatari royal who doubles up as the QIA’s chief executive – baulking at recent headlines about the staggering losses his fund has incurred in recent weeks.

The Doha-based sovereign wealth fund was launched a decade ago to invest the riches of the Arab country, which come from oil and vast reserves of natural gas.

It has been hit by a combination of the slowdown in China and the fall in commodities prices that followed, along with the spectacular collapse in Volkswagen’s share price following the widening emissions scandal.

The Qatari fund is estimated to have suffered almost £8bn of losses on Volkswagen, Glencore and the Agricultural Bank of China – three of its biggest investments – over the previous three months.

The QIA is the third largest shareholder in Volkswagen, with 17pc of the ordinary shares. It also owns almost 13pc of the German car manufacturer’s preferred shares.

The 34pc slump in VW’s share price last week wiped £14.7bn off the value of the company.

This meant the QIA took an estimated £2.5bn hit on its fund.

Although yesterday’s dramatic rally in Glencore shares will have eased the pain slightly, the commodities trader has still proved a terrible bet for Qatar over the last 12 months. The QIA owns about 8.2pc of Glencore, which has seen its share price fall almost 77pc, equivalent to more than £32bn during that period. That translates to a hit of around £2.6bn for the sovereign wealth fund.

Glencore’s shares have been battered by the slump in the price in commodities and grim economic data from China, one of the largest consumers in the world of metals such as copper and iron ore.

Its woes have been compounded by a dire warning from analysts at Investec that its shares could be worthless if commodities prices do not rebound.

Investec says the same could apply to fellow miner Anglo American, but that Glencore is particularly vulnerable because it has debts of £8bn that are due to be refinanced by 2017.

Investors in mining stocks have been spooked by the problems in China which flared up last month and caused a rout in stock markets across the world.

But shares were already in decline as the price of oil has plummeted from $115 a barrel in June last year to just over $48. Unfortunately for the QIA, mining and oil stocks feature prominently in its top ten holdings.

It owns a 4.88pc stake in Royal Dutch Shell, which has seen £19.4bn wiped off its market value in the last 12 months as shares have fallen 31pc.

This equates to a paper loss of almost £1bn for the QIA.

It has also taken a hit of more than £100m from its 1.76pc stake in BG Group, which has fallen 16.5pc over the last year.

BHP Billiton, the London-listed mining, metals and petroleum giant, has proved another poor investment over the past 12 months as its shares have fallen almost 40pc. This has resulted in a £176m hit on QIA’s 1.6pc stake.

The Qatar Investment Authority declined to comment.

But while the paper losses are huge it is doubtful that the Al Thani royal family will be losing too much sleep. The Gulf state will almost certainly be one of the biggest winners from the breakneck growth in the London commercial property market.

The QIA owns some of the most prestigious and expensive properties in the capital. Its portfolio includes Harrods, which it bought from Mohammed Al Fayed in 2010 for a reported £1.5bn, the Shard skyscraper next to London Bridge station and One Canada Tower, the centrepiece of the Canary Wharf financial district.

There is also the very obvious point that, while the QIA has inevitably suffered big losses on some of its key holdings, these are only red ink on paper.

As far as anyone knows it has no plans to sell off its stakes in VW or Glencore, which may yet bounce back in value.