Abu Dhabi's Glencore bet won't be an easy win. The emirate is set to become the commodity trader's biggest outside shareholder after investing US$1-billion through one of its high-profile government funds. Aabar Investments and its parent, International Petroleum Investment Co., earned handsomely with crisis-era bets on Daimler AG and Barclays PLC.
But Abu Dhabi may struggle to repeat the trick.
Sheikh Mansour bin Zayed al-Nahyan, IPIC's chairman, has an enviable track record. The senior royal -who also owns Manchester City football club — used IPIC to pump £5-billion into British bank Barclays in the darkest days of the credit crunch.
That investment has delivered a return of at least 60%, and IPIC has locked in the gains by hedging its remaining shareholding.
Similarly, Aabar's purchased a 9% stake in German carmaker Daimler for ¤1.95billion in 2009. It is now worth more than twice as much.
But the Glencore investment doesn't offer the same obvious upside. For a start, the trader isn't looking for the kind of financial lifeline that Barclays and Daimler were trying to secure when they knocked on Abu Dhabi's door. Glencore wants the money to expand, and to underpin its IPO valuation.
Commodities are already hot property, and Glencore has plenty of other investors willing to buy in.
Aabar itself has undergone a radical transformation in recent years. What started out in 2005 as a publicly listed entity focused on the energy sector is now a fully owned arm of the government with stakes in everything from Virgin's space travel unit to Falcon Private Bank. And since Aabar was delisted last year, the overall performance of the group's diverse portfolio is less transparent.
What's more, not all of the emirate's large international investments have been a roaring success. Just look at the US$7.5-billion that the Abu Dhabi Investment Authority, the emirate's official sovereign wealth fund, invested in Citigroup Inc. in 2007, before the full extent of its problems became clear.
A big, rich cornerstone investor with some track record of success will surely help Glencore fill its order books. Abu Dhabi's returns look less certain.
Source: National Post
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