Qatar fund to target food and energy

Financial Times | 13 March 2009

By Andrew England in Abu Dhabi and Javier Blas

Qatar's sovereign wealth fund will turn its focus to commodities - particularly food and energy - in the second half of 2009, a senior official said yesterday.

Hussein al-Abdullah, executive director of the Qatar Investment Authority, which is estimated to have assets of about $60bn (€46.6bn, £43.1bn), said the fund would do "nothing" until the beginning of the second half of the year, when it would review its strategy.

After that period "the sectors we will focus more on are commodities, food, energy and water because it is an important sector and the prices will pick up", Mr Abdullah said at a conference in Dubai.

The focus on food comes as Middle East nations - particularly Saudi Arabia, race to secure their agricultural supplies by investing in overseas farmland following last year's food crisis. Agricultural commodities prices increased in 2008 to record highs and, after falling in recent months, remain above the 2006 pre-boom level.

Riyadh has recently announced the arrival of the first crop harvested on Saudi-owned overseas farmland and has launched the so-called King Abdullah initiative for Saudi agricultural investment abroad. Other countries, including the United Arab Emirates and Kuwait, are looking to invest in food commodities.

Gulf nations import most of their food and the rise in commodity prices last year was a source of soaring inflation in the region. Mr Abdullah did not elaborate on the type of food investments the QIA would consider. Bankers said the Gulf's sovereign funds considered themselves "oil-rich, cash-rich but food-poor" in the long term.

Mr Abdullah said: "We see a structural change in commodities because of the growth of the middle classes in China and India . . . the price of commodities will shoot up given that China and India are growing at 6 per cent and 3 per cent."

Gulf sovereign funds, boosted by soaring oil prices, had been active until recently - most notably with investments in ailing western banks. Gas-rich Qatar's fund invested $1.8bn in Barclays last year, and has stakes in J Sainsbury and the London Stock Exchange.

But as crude prices collapsed and global stock markets tumbled, the funds have taken a battering, leading analysts to say these funds would take a more cautious approach and hold back on some investments.

Estimates about the size of funds' losses vary because of their opaqueness, but Mr Abdullah said the QIA had lost less than 20 per cent of its value in 2008.
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