Qatar Investment Authority has applied for a licence to invest directly in the Chinese onshore market, and sources say it is hiring staff in Asia, although the timeframe for both is unclear.
The sovereign wealth fund's assets under management – derived chiefly from the country's liquefied natural gas exports – are set to increase to $135 billion this year, says the Institute of International Finance. A QIA board member said this year that the fund would be investing $30 billion in 2012 alone.
The fund has grown fast, having been set up in 2005 with a view to diversifying Qatar's asset base, and its investments include listed securities, property, alternative assets and private equity.
QIA did not respond to requests for comment.
The fund is following similar moves by its Middle Eastern peers, with Kuwait Investment Authority having received a $300 million qualified foreign institutional investment (QFII) quota earlier this month. KIA, with an estimated $300 billion in AUM, obtained its QFII licence in December
KIA also opened a representative office in Beijing in October, to act as its on-the-ground presence in China. The office does not manage or book investments, but explores opportunities for the home office to review; it seems likely that QIA is doing something similar.
Abu Dhabi Investment Authority (Adia), thought to be the world’s biggest sovereign wealth fund with $627 billion in AUM, is another Middle East SWF with a QFII licence, which it received in December 2008.
The QFII quota allows institutions to buy China A-shares and domestically issued renminbi-denominated bonds, among other onshore assets. The Chinese authorities have increased the pace of QFII approvals this year, as they continue to liberalise the domestic market.
(Other state institutions to have received QFII quotas this year include Malaysian sovereign fund Khazanah ($250 million in April), and Bank of Korea, ($300 million in January).)
However, it is very tough to hire A-share portfolio managers in Hong Kong, because they tend not to want to relocate from the mainland, says Nico Furze of recruitment firm Profile Group in Hong Kong. It may be, therefore, that institutions and fund managers are most likely to outsource such investments, at least for the time being, he adds.
The moves by Adia, KIA and QIA reflect the fast-developing links between the Middle East and China, and indeed Asia as a whole. This relationship was sparked largely by China’s rising thirst for Middle Eastern oil, but investment is increasingly flowing from Gulf Cooperation Countries to the east.
A collaboration unveiled in May between Qatar Asset Management Company (QAMC) and Barclays Natural Resource Investments (BNRI) is also indicative of the kind of deals being struck. The partnership will make private-equity purchases of energy and mining assets in Asia and elsewhere.
State-owned QAMC, set up by the Qatar Financial Centre Authority and sovereign wealth fund Qatar Investment Authority, will co-invest $250 million in BNRI’s current and future portfolio companies.