An investment firm controlled by a top Abu Dhabi royal has built a short position worth billions of dollars in US stocks, people familiar with the matter said, in a bet that growing fears over a recession will pressure markets.
Royal Group turned more negative on equities at the start of the year and has shifted more of its portfolio into short-term US Treasuries, the people said, asking not to be identified because the matter is private. The firm, chaired by United Arab Emirates National Security Adviser Sheikh Tahnoon bin Zayed al-Nahyan, is also investing more in commodities and crypto, they said.
The conglomerate, which helps to manage one of the world’s biggest family fortunes through a vast network of subsidiaries, planned to plough as much as $10bn into US and European stocks and other assets hammered by fears of a global slowdown, Bloomberg reported in October.
The company took profits on some of its investments in US markets late last year and has been revising its buy list of stocks there, the people said. The group will look to boost its exposure to the US once valuations improve and the Federal Reserve signals it’s gearing up to cut interest rate cuts, they said. It wasn’t immediately clear which stocks or sectors Royal Group is betting against. Officials at the firm didn’t respond to requests for comment.
Royal Group’s holdings include stakes in unlisted companies, making it hard to measure the scale of its assets. The Sovereign Wealth Fund Institute, which tracks the entities around the world, values its holdings at about $170bn — including a stake in International Holding Co, the largest listed UAE company. Royal Group does not disclose the overall value of its holdings or how much it has allocated to equity markets.
Sheikh Tahnoon’s firm has until recently prioritized investments across the developing world. With funds drying up in many markets around the world, Royal Group is emerging as an influential player in global finance and has become a key vehicle for the oil-rich Gulf state’s diversification strategy.
The group is hoping to take advantage of skittish market sentiment following the collapse of four US lenders, and as expectations of a worldwide economic slowdown grow. Stocks have traded sideways since the beginning of April as better-than-feared corporate earnings offset concerns around a possible recession and the health of regional banks. Still, the S&P 500 has gained about 7% this year.
With a potential credit crunch and rising oil prices threatening to further weaken growth while raising inflation, Bloomberg Economics expects the US to slip into a recession in July — two months earlier than previously anticipated.
Abu Dhabi has been consolidating more assets under the company’s umbrella. Earlier this year, Sheikh Tahnoon became chairman of the $790bn Abu Dhabi Investment Authority.
A Wall Street sign is pictured outside the New York Stock Exchange in the Manhattan borough of New York City. Royal Group turned more negative on equities at the start of the year and has shifted more of its portfolio into short-term US Treasuries, the people said, asking not to be identified because the matter is private. The firm, chaired by United Arab Emirates National Security Adviser Sheikh Tahnoon bin Zayed al-Nahyan, is also investing more in commodities and crypto, they said.
