DAVOS-Bahrain sov wealth fund to move into bonds, stocks

Thu Jan 28, 2010 1:24pm EST

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* Mumtalakat plans to diversify from private equity holdings

* Will tap credit markets after likely rating this year

By Natsuko Waki

DAVOS, Switzerland, Jan 28 (Reuters) - Bahrain's sovereign wealth fund, which invests mostly at home, plans to diversify away from private equity projects and into stocks and bonds, its CEO said on Thursday.

Talal Al Zain also told Reuters that Mumtalakat expects to receive a credit rating this year, which would allow it to tap capital markets for funding, including Islamic bonds.

Mumtalakat, which has assets of around $10 billion, has investments in 35 companies. It holds stakes above 50 percent in more than 15 of those firms.

"We want to diversify. We will be looking at investments across markets. Our immediate focus will be to diversify investments, channel funds more towards liquidity, that is fixed income, equity markets," Zain said in an interview.

A $1 billion motor sports-themed commercial real estate project in Bahrain was likely to be financed by a combination of investment from strategic investors, private sector funding and some of its own equity, he said.

But Mumtalakat would wait to receive its credit rating later this year before issuing bonds.

"Getting a rating, which is to us to be transparent. As we get a rating we will tap capital markets," he said.

GOVERNANCE

Getting a credit rating has several implications. It requires sovereign wealth funds (SWFs) to become more transparent, given the level of disclosure they must offer to receive a rating from international rating agencies.

It can also show that the business is independent from its state owners. Western countries have criticised some SWFs for making investment decisions based on political rather than commercial motivations.

Mumtalakat, which publishes annual reports and discloses its assets, is one of the most transparent SWFs in the Gulf.

"Some hostility from some Western European countries and the United States towards SWFs in my mind came out because of the lack of transparency," he said.

"In order for us to be a fair player in the market, we have to be transparent. It helps us ease the process of achieving our targets. We want to have the best corporate governance..."

Mumtalakat is facing an inquiry launched by Bahrain's parliament this month into what it sees as mismanagement at the fund. Zain has previously said he was relaxed about the probe.

Some members of parliament accuse Mumtalakat of injecting money into portfolio companies such as Gulf Air and Bahrain International Circuit without disclosing sufficient information.

Some MPs also accuse Mumtalakat of spending more on consultancy services without informing a state tender board.

(Editing by Lin Noueihed)

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