The fund has been shifting its investment portfolio and strategy since 2018
Qatar Investment Authority is generating strong returns on multi-billion dollar investments it made on distressed debt and highly rated bonds at the start of the COVID-19 crisis, according to Reuters.
The sovereign wealth fund bet that the investment grade bonds would rebound from lows hit in March. Since then, the S&P 500 Investment Grade Corporate Bond Index has gained about 20% since hitting a low of 417.88 in mid-March, making QIA money.
This comes as a departure from its previous portfolio purchases, as QIA put significant sums of money into ‘distressed credits,’ including funds that help struggling companies.
The strategy paid off for the fund as S&P U.S. High Yield Corporate Distressed Bond Index went up by more than 80% since hitting a record low of 119.44 in late March.
“QIA saw the opportunity to help struggling companies become more sustainable, while generating strong risk-adjusted returns for our stakeholders,” a QIA spokesperson said in an email to Reuters.
The new strategy is part of a new outlook since Mansoor al-Mahmoud, a former head of risk management at the fund, became chief executive in 2018.
As part of its shift into credit, QIA also teamed up with Credit Suisse to provide financing to the upper middle market and larger companies in the United States and Europe.
“We deployed capital in investment grade, high yield, distressed and structured credit markets using a combination of our in house expertise and external fund managers, including the previously announced Credit Suisse lending platform,” the QIA spokesperson added.
QIA’s investment via the deal was estimated at $1 billion by Global SWF, a data provider that tracks sovereign wealth funds.
QIA does not publicly disclose its annual returns, however Global SWF estimates that across all sovereign wealth funds, returns dropped to 2.2% in 2020, from 18.3% growth in 2019.