Monday’s Financial Times notes that the Qatar Investment Authority (QIA), the sovereign wealth fund of the Middle Eastern State of Qatar, is changing its investment strategy.  Qatar is a country of 2.2 million people and 15 billion barrels of oil (that we know about), making it one of the wealthiest places on earth.

Since its inception in 2005, the $335 billion QIA has focused on expensive “trophy” assets, like the Canary Wharf property development and Harrods in the UK and film company Miramax plus 13% of Tiffany in the US.  It owns high-end hotels and office buildings all over the place.

According to the FT, however, the QIA has now decided to shift its focus to index funds and ETFs, indicating to the newspaper that the world supply of new trophies waiting to be bought is running low.

Maybe this is true, although there is a much more obvious issue with the QIA’s holdings that neither it nor the FT allude to.

Such trophies are virtually impossible to sell, except maybe to other Middle Eastern sovereign wealth funds.

Hotel companies in the US, and latterly elsewhere, have spent the past two or three decades shedding their properties–while retaining management contracts–because the returns on ownership are so low.  Iconic office buildings are a much better return bet.  But, again, there are only a limited number of possible buyers of, say, a $5 billion project.  A sharp price discount would likely be in order to compensate for taking on an expensive, highly illiquid asset like this on short notice–doubly so if the buyer sensed the seller was having cash flow problems.

It seems to me that the QIA bought into the narrative of “peak oil,” meaning a looming shortage of crude, that has been the consensus among oilmen for the past couple of decades–up until the emergence of mammoth amounts of shale oil production from the US three years or so ago. that is.  So liquidity was never a consideration.

I think the QIA change of strategy is the prudent thing to do.  It’s odd, though, that the QIA is calling public attention to the shift.  This would seem to imply at least that it has no need to divest any of the trophies it now has on its shelves.

Of course, something deeper may be going on as well, since the unasked question is who else may be in worse shape and may want to offload illiquid assets before its cash squeeze becomes evident.

Surprise!  That train has just left the station.