The Qatar Investment Authority (QIA) is set for a big cash injection from the Gulf state’s natural gas bonanza, just as the fund is pushing ahead with an investment strategy that increasingly focuses on venture capital.
The Qatar News Agency reported that the FY2022 budget saw a surplus of QAR89 billion (US$24.5 billion), a massive increase from QAR1.6 billion (US$0.4 billion) in FY2021 and significantly better than the projected QAR8.3 billion (US$2.3 billion) deficit in the original budget. The size of the surplus in 2022 mirrors the levels seen in 2012-2014 a decade ago when the surplus was QAR77 billion (US$21 billion) to QAR109 billion (US$29.9 billion) because of spiking energy prices. Qatar's energy revenues swelled 67% y-o-y in H1 2022 with prices remaining high over the remainder of the year.
In 2023, Qatar forecasts a surplus of QAR29 billion (US$8 billion), based on a predicted 16.3% rise in revenue, amid rising oil prices, which determine the price of Qatar’s LNG exports. The surpluses in 2022 and 2023 suggest a windfall of up to QAR118 billion (US$32.4 billion), much of which will be funnelled into QIA’s coffers.
QIA’s chief executive Mansoor Bin Ebrahim Al-Mahmoud said in an interview at the Qatar Economic Forum last year, “Our colleagues in Qatar Energy have been signing partnerships to expand LNG production by 60%. Most of this inflow would come to QIA… Hopefully, by 2026 we will increase this inflow and we will increase our level of activities.” The surpluses are likely to be sustained over the medium-term, even as energy prices ease, due to growth in condensate production capacity from 700,000b/d in 2022 to 1.0 million b/d by 2027 as it expands its LNG sector. The startup of Barzan gas project in 2020 coupled with growth from the North Field East and from North Field South LNG projects.
Global SWF estimates that the fund’s AUM was US$450 billion in 2021, but with the cash injection and likely returns on investment, Qatari SWF could easily surge to over half a trillion dollars by end-2023 – or 280% of the state’s GDP in 2021.
QIA will need to consider where to invest this surge of cash. The fund already has a high exposure to alternatives, with 32% of AUM in private equity, 16% in infrastructure, 16% in real estate and 2% in hedge funds. In 2022, Global SWF data found that QIA originated more than US$3.3 billion of deals in private equity, a figure that has grown markedly over recent years in line with the fund’s rising interest in venture capital – mostly in US-based startups.
LNG is also being recycled into investment in renewables. Last year, QIA’s biggest investment was EUR2.4 billion in RWE to support its accelerated ‘Growing Green’ strategy and funding the acquisition of Con Edison Clean Energy Businesses, which is set to position RWE as one of the leading renewable energy companies in the US. RWE’s development pipeline will expand to 24GW with solar represented 40% of the group’s US portfolio, up from just 3% now.
Additionally, QIA is looking to expand in emerging markets, with an eye to markets such as Pakistan and Egypt where Qatar is seeking to expand its soft power. Last year, QIA announced plans to invest US$3 billion in strategic sectors of the Pakistani economy, including the country’s largest airports in Islamabad and Karachi, as well as in the renewable energy, power and hospitality sectors. At the same time, QIA is looking to invest US$5 billion in Egypt. It began negotiations with The Sovereign Fund of Egypt (TSFE) to snap up stakes in companies in the fintech and food sectors.
The changing strategy to diversify investments across asset classes, sectors and geographies has come under the new leadership, appointed in 2018. Mohammed bin Abdulrahman Al Thani, the Deputy Prime Minister, became Chairman and Mansour Al Mahmoud, the CEO. Today, the QIA enjoys a brand-new board comprised of eight members (four Al Thanis) and a new structure with four regional groups (Americas, Europe-Russia-Turkey, Africa-AsPac and Qatar), nine sectorial teams and separate departments for liquid securities and capital markets. In addition to New York, it opened an office in Singapore in 2021, shutting down Mumbai and Beijing, and recruiting local talent to pursue investments across the region.
