Ego investing

Most Roaring markets at some point give way to pure ego indulgence, wrapped up though it may be in rationalized notions of "investing".

Istithmar World is just one instance of the syndrome. Istithmar World is a subsidiary of Dubai World.

Dubai’s Trail of Dud Deals Shows Sovereign Wealth Gone Awry

Istithmar contributed about $2.5 billion of its own cash to back $27 billion of purchases since 2003, the people said, speaking anonymously because the strategy was private. It used so-called non-recourse bank loans, backed by specific assets, to finance about 75 percent of its acquisitions, one of the people said. The rest was funded with a mixture of its own cash and money borrowed from banks on a term-loan basis that was backed by Istithmar or Dubai World, the person said.

Istithmar’s deals were part of Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum’s attempt to raise the Arabian Peninsula emirate’s profile as he tried to vault it into the top ranks of the world’s financial centers.

Under Chief Executive Officer David Jackson, the former Lehman Brothers Holdings Inc. executive who has led the fund since 2006, and his predecessor, Muneef Tarmoom, Istithmar roamed the world to target high-end businesses. The fund bought a stake in Perella Weinberg Partners, the boutique advisory firm run by Joseph Perella, and two of Manhattan’s most exclusive hotels, the W Union Square and the Mandarin Oriental at the Time Warner Center. It acquired the Queen Elizabeth 2, the Cunard Line flagship for more than three decades, with plans to convert it into a hotel to be moored beside the emirate’s Palm Island.

Istithmar also bought stakes in Cirque du Soleil, the Montreal-based company known for staging extravagantly acrobatic circus-like performances around the world, and Yacht Haven Grande, a marina complex in the Caribbean catering to so-called mega- yachts.

“Abu Dhabi is now and will continue calling the shots in Dubai,” said Rochdi Younsi, head of Middle East research at Eurasia Group, a New York-based political-risk consulting firm, who expects additional bailouts from Abu Dhabi. “They’re making serious demands that Dubai keep only its viable arms and consolidate or shut down overleveraged ones like Istithmar.”

“It’s critical that Dubai downplay any restructuring of Istithmar as business-as-usual,” Younsi said. “They’ve put way too much money and resources to let their reputation collapse.”