Dubai aims new fund at the West-DIC invest in worldwide stakes, SWF investing as our markets decline.

On March 16, 2008 · In Abu Dhabi, DIC, Dubai, Islamic Bonds, Islamic Finance, Islamic Law, Shariah Bonds, Shariah Law, Sovereign Wealth Funds

Dubai aims new fund at the West

By Louise Armitstead and James Hall

Last Updated: 1:27am GMT 16/03/2008

Dubai, the oil-rich Gulf state, has launched a new multi-billion pound sovereign wealth fund as it looks to extend its reach in the global economy.

  • News and analysis on the UK and world economy

    The fund, which will be chaired by Sheikh Mohammed bin Rashid Al Maktoum, the emirate’s ruler, was officially created just eight days ago.

    It is believed that unlike Dubai Holdings and its most high-profile investment vehicle, Dubai International Capital (DIC), the new fund is backed by state money and not just the personal wealth of the Maktoum family. The fund, which at present is called the Investment Corporation of Dubai, will operate separately from Dubai Holdings, according to executives close to the situation.

    The new fund will, if all goes well. acquire a big stake in Inmobiliaria Colonial, the Spanish property group. Recently Dubai tabled an offer to buy an 85 per cent stake for about €9bn.

    Dubai is investing heavily in assets in industrialised and developing nations worldwide. Last month DIC said it planned to invest about $5bn (£2.5bn) in China, India and Japan over the next three years. Over the past four months Middle Eastern sovereign wealth funds have invested an estimated $18bn (£8.9bn) in Europe and the US.

    It is unclear whether the new fund will invest in any particular type of asset, company or country.

    DIC is one of the highest profile sovereign wealth funds. Late last year it appointed Nobuyuki Idei, the former chief executive of Sony Corp, Helmut Panke, the former chief executive of BMW, and Jean-Pierre Garnier, the chief executive of GlaxoSmithKline, to its advisory board. Last week Tom Hicks, the American co-owner of Liverpool Football Club, broke off talks with DIC over its plan to buy a stake in the club. DIC also owns stakes in HSBC, Sony and EADS.

    Sovereign wealth funds have become major players in global business in recent years. The funds allow rich nations to make the most of their oil-derived wealth by investing in cheap assets in Western industrialised nations and developing countries. Middle Eastern funds have targeted banks, including Citigroup and UBS.

    Late last month Qatar’s £30bn sovereign wealth fund bought just under 2 per cent of Credit Suisse. The Qatar Investment Authority wants to spend between £5bn and £7.5bn on bank stakes over the next two years. However the fund said it would steer clear of US banking stocks due to uncertainty about their exposure to sub-prime loans.

    Last September QIA bought a 15 per cent stake in the London Stock Exchange. Borse Dubai also holds a significant stake in LSE.

    Last week the Singapore government’s fund, GIC Special Investments Pte, agreed to invest $1.5bn in the Benetton family’s infrastructure vehicle.

    The Abu Dhabi Investment Authority (ADIA) is the world’s biggest sovereign wealth fund with £444bn of assets under management.

     

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