Qatar's programme of offering seed capital to asset managers to set up in the Qatar Financial Centre (QFC) has already achieved some big name signings. Barclays Natural Resources was last year given $250m in seed capital to relocate the front office of its private equity fund to Qatar, while Credit Suisse has recently agreed a joint venture to set up a new firm - Aventicum Capital - in Doha which will be seeded with between $200m and $500m.
Like an up-and-coming football club with a wealthy owner, Qatar has signalled its ambitions in the asset management space by using its chequebook to attract some marquee names to sign on the dotted line. But will others follow in their wake, fulfilling the state's ambitions of becoming a rival to Dubai as a financial services hub?
Qatar's plan consciously echoes that of Singapore in the 1990s, which grew its asset management industry from $30bn to $900bn using a seeding programme. With incentives supplied by Qatar's Sovereign Wealth Fund, the process is starting with big, global names, before moving on to target regional players, and also building up back and middle office services, from next year. The QFC's governing authority believes that the country's wealth means there is huge room for development: AUMs in the asset management industry currently represent only half a per cent of GDP in Qatar, compared to 5-8 per cent in many developed countries.
A variety of global managers are understood to be in talks with the QFCA, while it is also known to be discussing setting up a hedge fund platform with a joint venture partner, with the intention of buying up several hedge funds to run from the platform.
But despite these ambitions, and the potential incentives it can offer, Qatar faces an uphill struggle in some respects. There are two key differences with the Singapore example. One is the economic backdrop: fewer asset management players globally are in expansionary mode than they were in the 1990s, and the seed money may not be enough to persuade companies that it the time is ripe to enter the region and open a new office. The second is that while Singapore gained most of its traction from firms which did not already have a presence in its locality, Qatar must recognise that Dubai is now an established leader in the growing Mena asset management industry, and a key challenge of its sales pitch must be to persuade firms to relocate existing front office staff from the DIFC and elsewhere.
It's not an unreasonable ambition for Qatar to attempt to become a regional financial services hub, especially when it has the resources to back it up. But it will take time, and Dubai may not give it up its crown easily. The very nature of regional hubs is that there can only be one of them at any one time, and when it is front office staff in particular that are being targeted, many firms will prefer to make a straight choice rather than running two offices in tandem. Concerns over infrastructure, healthcare and education will need to be addressed to make it more appealing for expats to relocate, and the challenge will be building a critical mass of firms who are willing to make the move, and in so doing make the environment more conducive for others to follow.
Little wonder then that key figures in the QFCA believe that the process could take up to a decade, and some doubt whether the envisaged hub will take shape before the first ball is kicked in the 2022 World Cup. Nevertheless, those who doubt that it can be done need only be reminded that the financial centre of the region has shifted frequently in the past, with Kuwait and Bahrain justifiably thought of hubs before Dubai's rise to prominence.
Just as football clubs with plenty of money behind them have a habit of winning the title eventually, Qatar has shown early signs that it is willing to put in what it takes to rise to the top, and it may be only a matter of time before it is playing in the big leagues.
© Zawya 2013
