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The logo of Glencore is seen in front of the company's headquarter in the Swiss town of Zug on May 9, 2012.

Arnd Wiegmann/Reuters

Qatar's demand that Glencore sweetens its offer to merge with Xstrata doesn't mean the Gulf state has suddenly become a gutsy activist investor. But it does show that Qatar won't sit by passively when a bid for one of its holdings puts it on the spot.

The decision by Qatar to speak out publicly last week on the proposed $71-billion (U.S.) commodities tie-up was a surprise. Qatar Holding, the state's direct investment vehicle, had built up an 11-per-cent stake in Xstrata without making any noise.

The fund has been more active than other sovereign funds – it seeks board seats and has even offered cash-strapped targets cheap loans as part of its investment. But making statements on M&A terms marks a new departure and made Qatar looked a lot like an agitating hedge fund.

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In reality, Qatar is only catching up with the likes of long-term Western asset managers such as Standard Life and Schroders. Qatar's stake-building began before the deal was announced.

The fund felt compelled to speak out because the market was convinced – wrongly – that it supported Glencore's offered terms for Xstrata, according to a person familiar with the situation.

Qatar is unlikely to start assaulting underperforming companies in need of a kick. Its portfolio contains several such potential targets that it has so far left alone. Take its holdings in inefficient French conglomerates Lagardere and Vivendi. These investments appear to be driven by a strategic concerns. As a sovereign investor, Qatar also has to tread more carefully around targets with government backing.

Qatar's small team of decision-makers is still too inexperienced and reliant on external advisers to pursue genuine activism. But it doesn't require many resources to demand more value from Glencore. The cost will be measured in lost credibility if Qatar finally agrees to an offer pitched at substantially below the level it has indicated is acceptable.

The rational interpretation of Qatar's behaviour is that it doesn't care if the deal fails, and has bought into Xstrata as a genuine long-term strategic investment. If that's the case, Glencore will have to strain hard to get what it wants.

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