An Abu Dhabi royal-controlled investment firm, Royal Group, has reportedly built a short position worth billions of dollars in US stocks in anticipation of a potential market recession. The firm, chaired by United Arab Emirates National Security Adviser Sheikh Tahnoon bin Zayed Al Nahyan, has taken a more negative stance on equities since the beginning of the year and shifted a larger portion of its portfolio into short-term US Treasuries.
According to sources familiar with the matter, the Royal Group has also increased its investments in commodities and cryptocurrencies. The conglomerate manages one of the world’s largest family fortunes through an extensive network of subsidiaries and had planned to invest up to $10 billion in US and European stocks and other assets impacted by fears of a global slowdown.
Revising US stock exposure and awaiting Federal Reserve signals
The company took profits on some of its US investments late last year and has been revising its list of US stocks to buy. Also, the group plans to increase its exposure to the US market once valuations improve and the Federal Reserve signals its intention to cut interest rates. It is unclear which stocks or sectors Royal Group is betting against.
Until recently, Sheikh Tahnoon’s firm has prioritized investments in the developing world. However, with funds drying up in many global markets, the Royal Group is emerging as an influential player in global finance and a key vehicle for the oil-rich Gulf state’s diversification strategy.
Predictions of a US recession
The group aims to capitalize on uncertain market sentiment following the collapse of four US lenders and amid growing expectations of a global economic slowdown. Stocks have traded sideways since April as better-than-expected corporate earnings have balanced concerns about a potential recession and the health of regional banks. The S&P 500 has gained about 7% this year.
Bloomberg Economics predicts that the US will fall into a recession two months earlier than anticipated in July due to a potential credit crunch and rising oil prices that could further weaken growth and raise inflation. In response, Abu Dhabi has been consolidating more assets under the Royal Group’s umbrella, strengthening Sheikh Tahnoon’s status as the top businessman in the royal family under the rule of his older brother, UAE President Sheikh Mohammed bin Zayed.
Sheikh Tahnoon’s influence has expanded beyond his roles as the United Arab Emirates’ national security adviser and head of the country’s largest lender, First Abu Dhabi Bank PJSC. Earlier this year, he became the chairman of the $790 billion Abu Dhabi Investment Authority, further consolidating his regional power.
