Shovel money into hole, douse with petrol, set alight. Gulf investors got burned last year after they invested billions of dollars in struggling banks. The Abu Dhabi Investment Authority and its counterparts in Kuwait and Qatar no doubt thought they were getting a great deal when they agreed to inject capital into banks such as Citigroup and Barclays. Events proved otherwise.
Big sovereign wealth funds and smaller state-controlled investment vehicles have retrenched in recent months as falling oil prices added to the pain. Still, with all that oil wealth to put to work, no one expected them to sit still forever. And with last week’s €2bn investment in Daimler, the German carmaker, by Abu Dhabi’s Aabar Investments, the sovereigns are back.
Of the ten biggest direct investments by the world’s sovereign wealth funds since 2007 – transactions totaling more than $60bn, according to Dealogic – only one was for a non-financial firm. After this expensive and lopsided diversion, further diversification makes sense.
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