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Qatar revamps investment strategy after Kushner building bailout

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LONDON/NEW YORK/DUBAI (Reuters) – When news emerged that Qatar may have unwittingly helped bail out a New York skyscraper owned by the family of Jared Kushner, Donald Trump’s son-in-law, eyebrows were raised in Doha.

FILE PHOTO: U.S. President Donald Trump, flanked by White House senior advisor Jared Kushner, meets with Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman at the Ritz Carlton Hotel in Riyadh, Saudi Arabia May 20, 2017. REUTERS/Jonathan Ernst

Kushner, a senior White House adviser, was a close ally of Saudi Crown Prince Mohammed bin Salman – a key architect of a regional boycott against Qatar, which Riyadh accuses of sponsoring terrorism. Doha denies the charge.

Brookfield, a global property investor in which the Qatari government has placed investments, struck a deal last year that rescued the Kushner Companies’ 666 Fifth Avenue tower in Manhattan from financial straits.

The bailout, in which Doha played no part and first learned about in the media, has prompted a rethink of how the gas-rich kingdom invests money abroad via its giant sovereign wealth fund, two sources with knowledge of the matter told Reuters.

The country has decided that the Qatar Investment Authority (QIA) will aim to avoid putting money in funds or other investment vehicles it does not have full control over, according to the sources, who are familiar with the QIA’s strategy.

“Qatar started looking into how its name got involved into the deal and found out it was because of a fund it co-owned,” said one of the sources. “So QIA ultimately triggered a strategy revamp.”

The QIA declined to comment.

Canada’s Brookfield Asset Management Inc bailed out 666 Fifth Avenue via its real estate unit Brookfield Property Partners, in which the QIA acquired a 9 percent stake five years ago. Both parent and unit declined to comment.

The QIA’s strategic shift was made late last year, according to the sources. It offers a rare insight into the thinking of one of the world’s most secretive sovereign wealth funds.

The revamp could have significant implications for the global investment scene because the QIA is one of the world’s largest state investors, with more than $320 billion under management.

The wealth fund has poured money into the West over the past decade, including rescuing British and Swiss banks during the 2008 financial crisis and investing in landmarks like New York’s Plaza Hotel and the Savoy Hotel and Harrods store in London.

QATARI BOYCOTT

Kushner was chief executive of Kushner Companies when it acquired 666 Fifth Avenue in 2007 for $1.8 billion, a record at the time for a Manhattan office building. It has been a drag on his family’s real estate company ever since.

The debt-laden skyscraper was bailed out by Brookfield last August, when it took a 99-year lease on the property, paying the rent for 99 years upfront. Financial terms were not disclosed.

The QIA bought a 9 percent stake in Brookfield Property Partners, which is known as BPY and is listed in Toronto and New York, for $1.8 billion in 2014.

BPY has about $87 billion in assets, part of more than $330 billion managed by its parent Brookfield. The stake purchase by QIA was in line with its strategy to boost investments in prime U.S. property. The investment gave QIA no seat on the board of BPY.

The Qatari wealth fund was not involved in the 666 Fifth Avenue deal, a source close to Brookfield Asset Management told Reuters. There was no requirement for Brookfield to inform the QIA beforehand.

The rescue rankled with Doha, according to the two sources familiar with the QIA’s strategy, because Kushner – married to U.S. President Trump’s daughter Ivanka – had long been one of the key supporters in Washington of the Saudi crown prince, who is the king’s favorite son and heir to the throne.

Prince Mohammed was a prime mover in leading regional states to severing links with its neighbor Qatar and embargoing the small nation since mid-2017. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain accuse Qatar of sponsoring terrorism. Doha denies the allegation and says the other countries simply want to strip it of its sovereignty.

“There is no upside in investing through funds for someone like QIA. Qatar wants full visibility into where its money goes,” said the second source familiar with the QIA’s strategy.

The QIA will not wind down existing investments with Brookfield or others, but will rather no longer invest in similar deals, according to the two sources.

The source close to Brookfield said relations with QIA were still strong.

STILL GOING BIG

The QIA’s strategic revamp also followed a reshuffle at the top of the fund last November when its long-serving chief, Sheikh Abdullah bin Mohamed bin Saud al-Thani, was replaced by its former head of risk management, Mansour Ibrahim al-Mahmoud. Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani was named QIA chairman.

Qatar, whose wealth comes from the world’s largest exports of liquefied gas, does not provide data on how much money it places with external fund managers.

“What we have seen lately is that it has have not been placing much,” said a Western fund manager who regularly sources money from wealth funds. “Either they are investing themselves or they are just sitting on a lot of cash.”

The Qatar shift in its approach reflects a wider trend among sovereign wealth funds to reduce reliance on external investment managers, in an attempt to keep tighter control over their money.

The Abu Dhabi Investment Authority, for example, said last year that 55 percent of its assets were managed by external managers in 2017, down from 60 percent the year before.

Yet, even if the QIA is being more cautious in its choice of investment vehicles, there is little indication that its appetite for big international acquisitions has diminished.

In December, new QIA chief Mahmoud told Reuters the fund was focusing on “classic” investments in the West such as real estate and financial institutions, and would also accelerate investment in technology and healthcare.

“The instructions from the top are to go out and do big deals,” said a Western banker who has held talks with Qatari officials.

He said QIA’s dealmaking had not stopped even during the height of the Gulf embargo, which initially forced the fund to put in about half of the $43 billion injected by public-sector firms into Qatari banks to mitigate the impact of outflows.

FILE PHOTO: A building at 666 Fifth Avenue, owned by Kushner Companies, rises above the street in New York, U.S., March 30, 2017. REUTERS/Lucas Jackson

With oil and gas prices growing over the past two years, Qatar has not departed from what it is best known for – snapping up big-names properties.

In 2017, QIA pledged to ramp up its investments in Britain to 35 billion pounds ($45 billion) from 30 billion. Since then, it has spent about 1.7 billion pounds on real estate and another 1.1 billion on infrastructure in the country.

In recent months, Qatar has bought New York’s Plaza and London’s Grosvenor House hotels.

Additional reporting by Eric Knecht; Writing by Dmitry Zhdannikov; Editing by Pravin Char

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S&P 500 posts highest close since November 8 on trade optimism

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NEW YORK (Reuters) – The S&P 500 posted its highest closing level since Nov. 8 on Friday as investors clung to signs of progress in the ongoing trade talks between the United States and China.

Investors assessed a slew of headlines on the talks, with top trade negotiators from the two countries meeting to wrap up a week of discussions on some of the thorniest issues in their trade war.

If the two sides fail to reach a deal by midnight on March 1, then their seven-month trade war could escalate.

“People are expecting some sort of positive news on trade and tariffs with China fairly soon,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“But we won’t know until the end of next week,” he said, and, “there has been a lack of specifics.”

Optimism on the trade front and dovish signals from the U.S. Federal Reserve have driven the recent gains and left indexes well above their lows of December, when the market swooned on fears of an economic slowdown. The S&P 500 is now up about 19 percent since its late-December low.

The S&P 500 technology index was up 1.3 percent, leading gains among the 11 major S&P sectors, while the trade-exposed industrials index climbed 0.6 percent.

The Dow Jones Industrial Average rose 181.18 points, or 0.7 percent, to 26,031.81, the S&P 500 gained 17.79 points, or 0.64 percent, to 2,792.67 and the Nasdaq Composite added 67.84 points, or 0.91 percent, to 7,527.55.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 22, 2019. REUTERS/Brendan McDermid

All three indexes registered gains for the week, with both the Dow and Nasdaq posting a ninth week of increases.

The number of New York Stock Exchange and Nasdaq stocks hitting 52-week highs hit 367, the most since mid-September and outnumbered those hitting year lows by the widest margin in six months.

Stocks briefly pared gains after U.S. officials briefed on the negotiations said more time is likely needed in the talks given China’s resistance this week to American demands for specific steps by Beijing to end forced transfers of U.S. technology and certain other policies.

Afterward, President Donald Trump said there was a very good chance the United States would strike a deal with China to end the trade war, and that he was inclined to extend his March 1 deadline to reach an agreement.

“Right now the downside risk has been not as steep, but there’s always a concern that something happens last-minute,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

“Having a Chinese economy that stabilizes is constructive for global markets,” she said. “That’s what is key in terms of the market looking at the results.”

Kraft Heinz Co tumbled 27.5 percent, and was the biggest drag on the S&P along with a 1.7 percent fall in Class B shares of the company’s controlling stakeholder, Berkshire Hathaway Inc.

The packaged food company posted a quarterly loss, disclosed a Securities and Exchange Commission probe and wrote down the value of its iconic Kraft and Oscar Mayer brands.

Slideshow (2 Images)

Advancing issues outnumbered declining ones on the NYSE by a 2.99-to-1 ratio; on Nasdaq, a 2.45-to-1 ratio favored advancers.

The S&P 500 posted 64 new 52-week highs and three new lows; the Nasdaq Composite recorded 112 new highs and 21 new lows.

About 6.9 billion shares changed hands on U.S. exchanges. That compares with the 7.3 billion-share daily average for the past 20 trading days.

Additional reporting by Shreyashi Sanyal and Sruthi Shankar in Bengaluru; Editing by Chizu Nomiyama and Jonathan Oatis

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FCA sets $14 million annual target compensation for CEO Manley: filing

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FILE PHOTO: Fiat Chrysler Automobiles (FCA) CEO Mike Manley arrives at the memorial service held in honor of former CEO Sergio Marchionne in Turin, Italy, September 14, 2018. REUTERS/Massimo Pinca/File Photo

DETROIT (Reuters) – Fiat Chrysler Automobiles NV (FCA) has set an annual compensation target for Chief Executive Officer Mike Manley consisting of pay, cash and equity bonuses of $14 million, the automaker said in a regulatory filing on Friday.

Manley took over as the head of FCA last July after the abrupt departure of his predecessor Sergio Marchionne. The company paid its new CEO 600,442 euros ($680,240) for 2018 and he will receive a bonus for 2018 of $367,000 to be paid this year.

Manley also was granted FCA 180,364 shares for his work in 2018, which will vest in 2019 if the company meets certain targets. The fair value per share on the date those were granted was $16.61, FCA said.

His target annual compensation consists of a base salary of $1.6 million, and a bonus of $2.4 million and an equity award valued at $10 million, both linked to the company hitting certain performance targets.

Former CEO Marchionne received 6.6 million euros in compensation for 2018, which consisted of nearly 2 million euros in base pay and an annual bonus for 2017 of just over 4.6 million euros.

For the 2014 to 2017 time period, Marchionne also received 2.8 million FCA shares. The fair value per share was $14.84, FCA said.

FCA chairman John Elkann received a base salary of 1.7 million euros and no annual bonus.

Reporting by Nick Carey; Editing by Sonya Hepinstall

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Flattening U.S. yield curve in late 2018 ‘flashing red’ on economy: Fed’s Williams

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President and Chief Executive Officer of the U.S. Federal Reserve Bank of San Francisco, John Williams, addresses a news conference in Zurich, Switzerland September 22, 2017. REUTERS/Arnd Wiegmann/File Photo

NEW YORK (Reuters) – A flattening U.S. yield curve in December, which was close to being inverted, was “flashing red” about a deceleration in U.S. economic growth heading into 2019, despite some solid data at the time, New York Federal Reserve President John Williams said on Friday.

The yield curve flattens as the gap between short and long-dated yields narrow, suggesting investors’ worries about a slowing economy.

The yield curve inverts when shorter-dated yields rise above longer-dated ones. An inverted yield curve has preceded all U.S. recessions in the past 50 years.

Williams was giving closing remarks at a conference about quantitative tools, jointly sponsored by the New York Fed and the Atlanta Federal Reserve.

Reporting by Richard Leong; editing by Diane Craft

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