Sheikh Mansour emerges as the Arabian Warren Buffett

Posted on 09 October 2010 with 4 comments from readers

Member of the Abu Dhabi ruling family’s inner circle, Sheikh Mansour bin Zayed Al Nahyan is emerging as the potential Warren Buffett of Arabia.

At the height of the global financial crisis in late 2008 he came to the aid of Barclays Bank and the bank was happy to sell him stock at a deep discount. Shareholders did not like it but this prevented the part nationalization of the bank as an alternative.

$3bn profit

Last week he completed his exit from this cool investment with a $3 billion profit, according to news reports, although the complex transaction apparently still leaves the sheikh exposed to any upside in the share price and completely protects him from any downside.

Lesser mortals in the Arabian investment world might care to follow this cue and dump stocks. It can be wise to follow the brightest investors. Those who have humbly followed the investment moves of Warren Buffett over the past few decades have become extremely rich. Certainly Sheikh Mansour’s investments will be watched very closely in future.

Sheikh Mansour also owns Manchester City football club. But it is comparatively rare to get a glimpse into the investment world of the Abu Dhabi sheikhs. It is only when publicly quoted companies are involved that their secret is out.

ADIA losses

However, investing during the financial crisis was not always so successful. Abu Dhabi Investment Authority poured $7.5 billion into Citigroup earlier in the crisis. That stake is still only worth a fraction of the original amount, and did not prevent the bank being effectively nationalized.

Warren Buffett himself bought stock in Goldman Sachs for a bargain price with a 10 per cent dividend at the height of the global financial crisis, and that investment is looking good right now. But he would be fully exposed to any renewal of global financial turmoil, unlike Sheikh Mansour since last week.

Buffett protected his downside in Goldman with that fantastic yield but the potential for capital losses is still there. And Goldman itself is warning that the outlook for the US economy is ‘fairly bad’ or ‘very bad’ (click here).

Unemployment rising

You certainly have to wonder about a US stock market that rises on a 95,000 increase in unemployment because of the twisted logic that says this make quantitative easing more likely, and that QE is always going to be good for share prices.

But then Sheikh Mansour’s remaining exposure to Barclays is limited to the upside only now, so he wins whether the market goes up or down. If it goes up then he gets the share price rise. If it goes down then he has the cash available to buy market bargains again. That does sound like an Arabian Warren Buffett.

And being in his mid-30s mortality is also stacked in his favor. For making a Buffett sized fortune requires a long lifetime to compound the gains, and at 80 years old time is no longer on Warren Buffett’s side.