Bahrain’s sovereign wealth fund plans to up foreign investments

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Arab Times | 30 March 2009

MANAMA, March 30, (RTRS): Bahrain’s sovereign wealth fund is eyeing stakes in U.S, European and Asian firms in sectors including commodities and financial services, and will add new asset classes to its portfolio, its chief executive said. The value of investments held by the sovereign wealth fund had fallen by about 10 to 15 percent from around $10 billion as a result of the global economic downturn, Mumtalakat CEO Talal al-Zain told Reuters on Monday.

In an interview in Bahrain’s capital Manama, Zain said Mumtalakat’s strategy to balance local and international investments does not necessarily mean the fund would sell down local stakes and shift proceeds to its international portfolio. “Our strategy is to balance our portfolio to be 50 percent local, 50 percent global ... I’m not saying I want to reduce my exposure to the local market, so I have a lot to invest to bring me to that 50 percent global,” he said, declining to give exact figures. Ninety-eight percent of Mumtalakat’s holdings are currently in local companies, including state carrier Gulf Air and Bahrain Telecommunications Co.

Investments

Sovereign wealth funds in the Gulf Arab region, the world’s largest oil-exporting region, slowed down their investments in Western companies when oil prices started to tumble last year.

Neighbouring Qatar’s sovereign wealth fund, the Qatar Investment Authority, said this month it does not plan to make any investments in the next six months.

But Gulf emirate Abu Dhabi last week bought a 9.1 percent stake in German car-maker Daimler through its listed investment vehicle Aabar, suggesting the fall in valuations could start to bottom out.

Bahrain is a small oil producer and Mumtalakat does not have the financial clout that neighbouring sovereign wealth funds have. It raised $500 million in a loan in August.

Opportunity

Zain said Mumtalakat is prepared to invest now if the opportunity is right, but added that sovereign wealth funds with more capital would naturally be the first to return to the market.

“We are looking at the food sector, financial services, telecommunications, hospitality and transport,” Zain said, adding the firm was aiming to buy minority stakes that would give it “some extent of control”.

Mumtalakat, which also has a 30 percent stake in the McLaren Group and its Formula 1 racing team, sees opportunities in the food sector as a period of high inflation would make investments in commodities attractive, Zain said.

“Right or wrong, I believe we will eventually hit inflation, there’s a lot of money being printed, and commodities will go up, and I just want to be there,” he said.

Gulf Arab states are looking to buy agricultural land and invest in the food industry, particularly in Africa, to secure their strategic food supply.
In financial services, Mumtalakat is looking to acquire stakes in banks and insurers but is also considering buying providers of services, such as outsourcing companies that help banks cut costs during the financial crisis, Zain said.
Original source: Arab Times
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