A Mideast Fund’s Failing Fortunes

Dubai’s once-heralded trophy assets now look more like lead weights. Istithmar World, one of the investment vehicles controlled by the emirate, has a portfolio that was estimated to be worth $9 billion last year. It includes a stash of big Western names, including Cirque du Soleil, Standard Chartered, GLG Partners, Perella Weinberg and Barneys New York. Now they could all be sold as part of a restructuring.

The fund picked up most of its assets at the height of the boom, but the portfolio itself is of mixed quality. Istithmar spent $825 million in 2007 to snap up Barneys, the retailer now on the cusp of bankruptcy. It holds 20 percent of the Canadian acrobatic performance group Cirque du Soleil and stakes of about 3 percent each in Standard Chartered, the global bank; a hedge fund, GLG; and the investment boutique Perella Weinberg. These are still valuable, even if they might be under water.

Istithmar claims to have generated a respectable average 10 percent annual return since its formation in 2003. The fund doesn’t disclose its debts. But even if the fund itself is sound, its parent, Dubai World, one of the emirate’s main holding companies, is certainly short of cash.