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 plow as much as $10 billion 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.
Influential Player
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.
READ: World’s Richest Family Rides 28,000% Stock Surge to $300 Billion
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, cementing Sheikh Tahnoon’s status as the royal family’s top businessman under the rule of his older brother, UAE President Sheikh Mohammed bin Zayed.
Earlier this year, he became chairman of the $790 billion Abu Dhabi Investment Authority, consolidating his power beyond roles that include the United Arab Emirates’ national security adviser and head of the country’s largest lender, First Abu Dhabi Bank PJSC.