The Times - Sainsbury’s suitor ranked second-worst in survey of sovereign wealth funds David Robertson in Doha

The Times - October 26, 2007



The Qatar Investment Authority (QIA), which has put in a £10.6 billion bid for J Sainsbury, the supermarket chain, lacks appropriate transparency and accountability, according to new research into sovereign wealth funds.

The Peterson Institute for International Economics, a Washington think-tank, has ranked the world’s sovereign wealth funds according to their good citizenship. Peterson, which analyses each fund’s structure, governance, transparency, accountability and behaviour, ranks the QIA as second-worst in the world in these terms.

The growing power of sovereign wealth funds owned by oil-rich countries has raised concern in the West about blue-chip assets falling into the hands of foreign governments. Little is known about many of these funds, which has fuelled jitters about their motivation and ambition.

The QIA is bidding for Sainsbury’s through the Delta Two investment vehicle and it has also taken a 14 per cent stake in the London Stock Exchange. The fund is run by Sheikh Ha-mad bin Jassim Al Thani, Qatar’s Prime Minister and Foreign Minister, but little is known about its operations. Its value is thought to have soared in recent years as oil has shot to more than $90 a barrel, enabling Qatar to direct its vast surpluses into the QIA.

Sources in Doha said that the QIA had only six staff three years ago but now has more than 60 after a step-up in its acquisition drive. However, the fund’s secrecy has prompted concern over its ties to British institutions such as Sainsbury’s and the London Stock Exchange. The QIA turned down requests for an interview.

The QIA, estimated to have assets exceeding $50 billion (£24.3 billion), is ranked second-worst by the Peterson Institute. Abu Dhabi Investment Authority is rated the worst. QIA ranks behind Iran’s oil stabilisation fund and Algeria’s revenue regulation fund.

The best government-owned fund belongs to New Zealand. The $10 billion superannuation fund ranks just ahead of Norway’s government pension fund and East Timor’s petroleum fund.

Sovereign wealth funds have existed for many years, but with oil’s recent rise, those of Middle Eastern countries have leapt in value. The entire market is thought to be worth $2 trillion and the largest single fund, Abu Dhabi’s, is estimated to be worth $500 billion to $875 billion. Norway has the second-largest fund, worth about $329 billion.

Qatar’s gas reserves have given the once undistinguished desert emirate the funds for an investment drive to diversify its economy for long-term prosperity. Part of this strategy is to build a portfolio of foreign assets, which includes the Four Seasons hotel chain.

Qatar has become an important Middle East power broker and yesterday declared its candidacy to host the 2016 Olympics. A huge party sent the message that the cost is no hurdle.

Fund of information

Peterson Institute rankings for sovereign wealth funds

Top 5
New Zealand Superannuation Fund $10bn
Norway Government Pension Fund $329bn
Timor-Leste Petroleum Fund $1bn
Canada Alberta Heritage Savings Trust Fund $15bn USA Alaska Permanent Fund $40bn

Bottom 5
UAE Mubadala Development Company $10bn
Brunei Investment Agenc $30bn
Singapore Investment Corporation $100bn-330bn Qatar Investment Authority $50bn UAE Abu Dhabi Investment Authority $500bn-875bn

Source: Peterson Institute (some fund sizes are estimates) ###