By Saeed Azhar and Tom Arnold DUBAI, Jan 19 (Reuters) - Qat
By Saeed Azhar and Tom Arnold
DUBAI, Jan 19 (Reuters) – Qatar Funding Authority is producing robust returns on a multi-billion greenback wager it made on distressed debt and extremely rated bonds at the beginning of the COVID-19 disaster, two sources aware of its transfer mentioned.
QIA, a sovereign wealth fund with belongings of $300 billion, owns division retailer proprietor Harrods and stakes in Barclays BARC.L and prime properties reminiscent of Canary Wharf in London, wager that funding grade bonds would rebound from lows hit in March, investing in each sovereigns and corporates, they mentioned.
It was not alone in such a shift, as sovereign wealth funds invested a web $4.5 billion throughout U.S. fastened revenue within the third quarter of 2020, probably the most since not less than the top of 2017, newest information from eVestment exhibits.
The S&P 500 Funding Grade Company Bond Index has gained about 20% since hitting a low of 417.88 in mid-March.
And in a departure from its earlier portfolio purchases, QIA additionally put vital sums into so-called distressed credit score, together with funds that assist struggling firms.
This too has paid off for the fund, with S&P U.S. Excessive Yield Company Distressed Bond Index up by greater than 80% since hitting a document low of 119.44 in late March.
The monetary sources, who have been aware of the small print of the offers, declined to be named as a result of they aren’t public.
QIA confirmed its strikes into each investment-grade bonds and distressed debt in an e-mail, however didn’t present particulars.
“QIA noticed the chance to assist struggling firms grow to be extra sustainable, whereas producing robust risk-adjusted returns for our stakeholders,” a QIA spokesperson mentioned.
The sources mentioned this mirrored a maturing of the QIA’s technique beneath Mansoor al-Mahmoud, a former head of danger administration on the fund who grew to become chief government in 2018.
It additionally owned a stake in U.S. jeweller Tiffany & Co, which it bought as a part of LVMH’s LVMH.PA $15.eight billion acquisition, making a achieve of round $892 million, based on analyst estimates and information from filings.
CREDIT SHIFT
Different Gulf funds additionally bulked up on riskier belongings in the course of the peak of the COVID-19 pandemic, with Saudi Arabia’s $400 billion Public Funding Fund investing greater than $7 billion in U.S. and international shares within the first quarter.
It raised its general publicity above $10 billion by the second, earlier than shedding $Three billion within the third quarter of 2020.
As a part of its shift into credit score, QIA has additionally teamed up with Credit score Suisse CSGN.S on a joint platform to offer financing to higher center market and bigger firms in the USA and Europe.
“We deployed capital in funding grade, excessive yield, distressed and structured credit score markets utilizing a mix of our in home experience and exterior fund managers, together with the beforehand introduced Credit score Suisse lending platform,” the QIA spokesperson mentioned within the e-mail to Reuters.
QIA’s funding through the deal was estimated at $1 billion by World SWF, an information supplier that tracks sovereign wealth funds.
QIA doesn’t publicly disclose its annual returns, nonetheless World SWF estimates that throughout all sovereign wealth funds, returns dropped to 2.2% in 2020, from 18.3% progress in 2019.
(Reporting by Saeed Azhar in Dubai and Tom Arnold in London; Extra reporting by Yousef Saba; Modifying by Alexander Smith)
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