Since 2007 global investment groups have reined in their bullish horns and had to select stock market strategies and re-orientate their holding company portfolios to match the heavily weakened climate. Defensive investment took precedence for much of that period, and that mentality still purveys as we still see today with the new schizophrenic alignment of gold and bonds safety plays versus the band-wagon appetite for stocks.
But perhaps for the major SWF, large PE and major institutional players a return to Macro-Strategy investing – long-term interests derived from PESTEL trends – has come back to the fore. Thus many asset-seekers will have been assessing various sectors and their inherent characteristics across many geographical regions, which in itself raises the issues of regional interest rates, inflation levels and of course relative local currency FX rates – present and future.
Given the enormity of their petro-dollar reserves, the present energy constrains of global industry and the previous high consumption consumers, and construction slow-down locally, Middle-Eastern funds have been seeking new investment regimes. Regimes that will provide: all important financial stability, allow for the creation of a synergistic set of ideally inter-related holding interests which themselves additionally promote regional GCC industrial learning and so extended sector GCC economic coverage beyond oil & gas as part of their own regional and national growth agendas.
Understandably GCC funds – whether family based, SWF related, PE or publicly accessed – have had a long affinity with the petroleum & automotive industries, only natural given the co-reliance of local oil drilling to consumer's historic vehicle needs and aspirations. Thus interests in automotive companies go back to the 1930s, taking tranches of stock in initially American, UK Japanese, Korean and German companies.
Recent times have seen the likes of the Bahrain Mumtalakat Holding Company's buy into McLaren Group , quickly followed by EFAD-Adeem Investment Group (and affiliates) buy into Aston Martin Lagonda in 2007, and through 2008 KIA (Kuwait Investment Authority) taking a prime hold of Daimler AG only to be overtaken by Aabar Investments in 2009. [NB Dubai International Capital previously holding 2%].
To a certain degree the GCC region has effectively become the patron, sponsor and beneficiary of 21st century 'Advanced Autos'.
That rolling dynamic continues now with the Qadbak Investment Company taking a controlling interest in the Sauber Formula One team, having bought-out BMW's 80% stake at the reported price of £80 million. Qadbak, although based in Switzerland, represents the confidential investment concerns of royal and aristocratic Middle-Eastern & European families. [NB investment-auto-motives has reason to believe that connections link to the ruling Qatari Al-Thani family]. Primary representation is reported to be via Lionel Fischer.
Exact details are still very sketchy beyond seemingly optimistic about running in the 2010 season as a 14th placed late-comer team. Questions like powertrain supplier, driver line-up etc remain to be seen, though in all probability it would seem likely that BMW might still maintain contract supply and technical support for the team.
What is very interesting is the way that Qadbak Investments is following others down a portfolio strategy route that matches regional and global macro-plays with the Sports-Entertainment-Leisure industry. And particularly the dual interests in the high-profile business worlds of team-based F1 and club-level Football.
Back in June Qadbak bought Nottingham County Football Club via is Munto Finance Ltd investment vehicle. Headed by Peter Willett. The deal price & promise of future potential undoubtedly bolstered by the fact that it is the oldest football club in the world and the rub-off effect of the 2009 film 'The Damned United' which profiled Nottingham Forest's ex-club manager Brian Clough as a local hero. Recapturing those recession era glory-days rings true today, the business model probably targeting the three fan-based elements of: heritage, affordability and local club-land loyalty.
But of course behind the glitz and glamour is the fundamental business rationale of gaining dual income streams from both the team / club itself: through sponsorship deals & visitor gate receipts, product merchandising and the real-estate itself through annual & ground rents from commercial leasees and of course the long-term capital appreciation of the land & facility.
As such merging the sport with the asset-base, Qadbak follows in the footsteps of the likes of CVC Capital often represented by Nicholas Clarry with its interests in F1 commercial rights holder FOH (along with Bernie Ecclestone) and a related defensive off-set by owning portions of the F1 circuits themselves that host the F1 races, other motor-sport events and so much more in the way of entertainment events. Qadback will have also been influenced by the interest Dubai International Capital took in seeking, and still seeking, to acquire Liverpool Football Club; a sale outcome, like that of Notts County backed by the supporters who witnessed Arsenal's success with sponsorship money from Emirates airline of the UAE.
The GCC nations are undoubtedly having a massive influence in the 2009-2010 global investment agenda, the likes of Kuwait and Bahrain, along with Qatar perhaps the 'hardest hitters' given their relative geographical size, smaller populations and so very high relative GDP.
A desire to create broad-base, defensive portfolios is key; and although still interested in the financial sector's upturn - having had their fingers burnt by buying back into that arena too early during the fragility/volatility – the GCC states and families seek firm asset-backed deals with multiple income streams.
The Sports-Entertainment-Leisure industry has proven itself as a good provider to do so; becoming ever more family-centric and creating a commercial psychologically aligned 'pleasure-safe-space' ideally running 365 days per year with obvious weekend & holiday focus.
And of course Qadbak will be seeking to ensure mutual learning and synergy seeking between its efforts to infuse value-creation into Sauber F1 and the same with Notts County FC. Of course the 2 are not completely symmetrical in terms of cross-pollination of business ethos, ideas and operations, but they should provide for interesting corroborative exercises in seeking fundamental and additional yields.
For both will be nurtured for a period to provide traction and self-momentum before Qadbak's exit strategy and timing come to light. In the meantime expect Lionel Fischer and Peter Willett to be comparing notes on how to evolve 2 teams of relative sporting minnows into competitive piranha and simultaneously sweat and expand their respective physical and human asset-bases.
That psychology of winning will need to be evident on 'track & field' to match the one backing the books.