A recent moral hazard

Soccer Distraction At Dubai Intl Capital DUBAI (Zawya Dow Jones)–Insiders say that you don’t stick around long working for Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum if you don’t make his business empire money. There will be no exceptions for Sameer Al Ansari, the CEO of the $13-billion investment fund Dubai International Capital, which is controlled by Sheikh Mohammed. Which is why it’s unlikely that the sheikh is particularly impressed with Al Ansari’s pursuit of Liverpool FC, the premier-league English soccer club. The move may be driven more by a rich fan’s enthusiasm for a trophy asset - Al Ansari is a keen Liverpool supporter - than cold analysis of the likely return on a new investment at a delicate juncture for Al Ansari and DIC. DIC’s offer for the whole club is almost double the GBP218.9 million that the U.S. investors Tom Hicks and George Gillet Jr paid for Liverpool last year, when they trumped DIC in an auction to buy the team. Should DIC succeed in buying only Gillet’s stake for an estimated GBP170 million, that still represents poor value for Sheikh Mohammed. Leaving aside the difficulty rich owners have had in making durable returns from owning Europe’s most famous soccer clubs, on the field, Liverpool is struggling to match the success of English rivals such as Arsenal, Chelsea, and Manchester United. That implies heavy spending on new star players if a new owner wants Liverpool’s game to improve. Al Ansari, who joined DIC in 2004, may be better advised to concentrate on the firm’s core business as many of its recent investments have performed poorly. DIC bought an unspecified stake in Sony Corp last November, but shares in the Japanese consumer electronics giant have dropped by 13% this year. The Dubai fund bought $1 billion-worth of shares in HSBC last May, and while the U.K. bank has outperformed its rivals, the stock is down around 17% since then. Shares in U.S. hedge fund Och-Ziff Capital Management have lost a third in their value since their October 2007 IPO. DIC bought a 9.9% stake for $1.15 billion in the offering. Al Ansari has inadvertently added to the gloom on global stock markets with a surprise comment last week that more outside capital would be required to rescue Citigroup. That helped knock sharply lower the price of Citi shares whose owners include infuential Arab investors such as Saudi Arabia’s Prince Alwaleed bin Talal, the Abu Dhabi Investment Fund - Sheikh Mohammed has close links to the neighboring emirate - and the Kuwait Investment Authority. DIC had to issue a statement backtracking on Al Ansari’s comment. So while Deloitte ranks Liverpool as Europe’s eighth wealthiest club, Al Ansari’s determination to get hold of this sporting prize risks becoming a needless distraction for one of Dubai’s highest-profile investment funds as sentiment on the world’s financial markets goes from bad to worse.