Qatar has spent $4.3 billion U.S. buying up European properties during the last twelve months. This is equivalent to about six weeks of income from Qatari LNG(liquefied natural gas) exports.
Qatar's sovereign wealth fund invested the $4.3 billion U.S. on eight different deals. Purchases include the London Olympic athlete's village and a mall on the Champs Elysees in Paris. A sovereign wealth fund is described as follows:A sovereign wealth fund (SWF) is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally. Most SWFs are funded by foreign exchange assets..
The investments may not give great returns but the funds see them as a safe bet within a global financial crisis. Given the situation in Europe at present no doubt the Qataris are able to buy properties at reasonable prices. While the funds may not have high yields, they probably do better than U.S. treasuries! Joseph Kelly of Real Capital Analytics said:“For sovereign wealth funds like the Qatar Investment Authority (QIA), property deals are about wealth preservation, not returns..They have a lot of money to spend, so deals tend to be big and in the cities they know well.”
Qatar Investment Authority has spent 5.7 billion Euros buying up real estate mostly in London and Paris. The EU's tallest skyscraper called the Shard which opened last month in London was funded by the QIA. The fund also owns the famous Harrod's department store and is a majority owner of the Canary Wharf financial district. The fund has diversified holdings in order to diversity its risk as well investing in auto-maker Porsche and Barclay's among other firms.
Another recent purchase is a 20 per cent stake in BAA that operates Heathrow and also airports in Glasgow and Aberdeen Scotland. Sovereign wealth funds enable countries such as Qatar to benefit from the returns on their natural resources rather than seeing profits siphoned off by foreign companies. In contrast Canada prefers to allow foreign companies to profit from its oil and gas properties including state owned companies from China!
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com