Sovereign Wealth Funds

[Guest Free America]

Sovereign wealth fund (SWF) is a state-owned fund composed of financial assets such as stocks, bonds, property or other financial instruments. Sovereign wealth funds have gained world-wide exposure by investing in several Wall Street financial firms including Citigroup, Morgan Stanley, and Merrill Lynch. These firms needed a cash infusion due to losses resulting from the credit crunch.

 

Some sovereign wealth funds are held solely by central banks, who accumulate the funds in the course of their fiscal management of a nation's banking system; this type of funds is usually of major economic and fiscal importance. Other sovereign wealth funds are simply the state savings which are invested by various entities for the purposes of investment return, and which may not have significant role in fiscal management.

 

Most SWFs are non-transparent, meaning they do not report their holdings or strategies to the Public. Some experts say they are passive investments, while others fear they are a matter of national security. These are causes for concern for many people, investors, and governments; and will eventually fuel the fires of Protectionism.

 

Sovereign Wealth Fund Examples

 

The Abu Dhabi Investment Authority (ADIA) is one of the government investment companies of Abu Dhabi, United Arab Emirates. It has been estimated that they have approximately $875 billion in assets. It struck a deal on November 26, 2007, with Citigroup, the largest US bank, by agreeing to invest 7.5 Billion dollars in Citigroup. This deal gives ADIA 4.9% of the New York-based bank, making it the largest shareholder, with Prince Alwaleed Bin Talal Al Saud of Kingdom Holding of Saudi Arabia the second-largest shareholder, with 4.3%.

 

The Abu Dhabi Investment Authority's (ADIA) main funding source is from a financial surplus from oil exports. It is rumored to be the largest of the Sovereign Wealth Funds. As much as 70% of its assets are administered by external managers.

 

Major Direct Foreign Investments (Public)

 

Advanced Micro Devices United States Technology 8.1%

Ziopharm Oncology Inc United States Technology 5.09%

Citigroup United States Financials 4.9%

 

Major Direct Foreign Investments (Private)

 

John Buck International United States Joint Venture 51%

 

Mubadala gains access to The John Buck Co.’s expertise and longstanding track record for delivering superior quality commercial real estate development, leasing and property management services, with TJBC gaining access to one of the world’s fastest growing real estate markets in Abu Dhabi.

 

Carlyle Group United States Private Equity Fund 7.5%

 

The Carlyle Group is a global private equity investment firm, based in Washington, D.C., with more than $81.1 billion of equity capital under management. The firm operates four fund families, focusing on leveraged buyouts, venture & growth capital, real estate and leveraged finance investments. The firm employs more than 575 investment professionals in 21 countries with several offices in North America, South America, Europe, Asia and Australia; its portfolio companies employ more than 286,000 people worldwide. Carlyle has over 1200 investors in 68 countries.

 

The firm is well known for the dozens of world political figures and luminaries it has employed. Some of these figures, such as George H. W. Bush and his Secretary of State James A. Baker III, have generated controversy stemming from allegations of conflicts of interest. The fact that the bin Laden family had any involvement at all in this organization raises alarm in some.

[Guest LAW_*]

Sovereign wealth funds n the Middle East could see a threefold surge in assets under management to $5 trillion within two years. The government-owned funds are thought to be currently worth more than $2 trillion, thanks to high energy and commodity prices.

 

But management consulting firm AT Kearney estimated the value of such assets globally was closer to $3.3 trillion last year - and predicted it would rise to $5 trillion in 2010 and up to $15 trillion in 2015. It said Middle East wealth funds accounted for half of last year’s total, or $1.65 trillion.

 

http://www.7days.ae/en/2008/05/27/wealth-f...5-trillion.html

[Guest LAW_*]

This is also a good read and a good indicator of what is to come

 

http://www.reuters.com/article/marketsNews...830141120080518

 

 

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The Kuwait Investment Authority (KIA) has warned Germany it may cut back its commitment to ploughing funds into Europe's largest economy if the Berlin government regulates sovereign wealth funds.

 

Many German politicians are nervous about the influence sovereign wealth funds can wield and their capacity to buy leading national companies or key national infrastructure.

 

KIA managing director Bader al-Saad told weekly magazine Der Spiegel that Germany's reservations about wealth funds had not yet influenced the investment activities of the KIA, which manages the Gulf Arab state's oil-generated assets.

 

"But we are very concerned," he added. "We still regard Germany as an economic anchor in Europe, and in the world... But in the future any regulation of sovereign wealth funds could restrict our commitment to your country."

 

German Finance Minister Peer Steinbrueck is due to travel next week to the Arabian Gulf region, where he is expected to meet managers at sovereign wealth funds to improve their relations.

 

The German government plans to extend existing legislation that gives Berlin a veto on takeovers of defence firms to include other industries, though Steinbrueck has said Germany does not want to scare off sovereign wealth funds.

 

"We are very surprised by Germans' worries about sovereign wealth funds. We have been in Germany for more than 45 years," Saad said.

 

Steinbrueck has previously described the German plans to defend domestic firms as modest compared to those of other countries, including Britain, France and the United States.

[Guest Fed Up]

I read an article in Bloomberg about how East Timor is seeking to revise laws to allow the government to invest as much as 40 percent of its $3 billion petroleum fund outside of U.S. Treasuries, mirroring efforts by sovereign wealth funds in Norway, Singapore and Kuwait. Asia's newest country (On 20 May 2002, Timor-Leste was internationally recognized as an independent state) is seeking higher-yielding assets as the U.S. dollar fell against major global currencies, boosting the price of imports such as food, with the country's farmers providing only a third of the rice it needs.

[Guest Ben Ami]

This article from the Wall Street Journal will knock your socks off

 

For months, Russian Finance Minister Alexei Kudrin has been traveling the world to make a pitch: The Kremlin's new National Wealth Fund, which starts out with $32.7 billion to invest but could grow to many times that, will be all business.

 

It's been a hard sell.

 

Moscow's emergence as a global investor has set off alarm bells across Europe and the U.S., where leaders are growing wary of the Kremlin's widening control of the Russian economy and its projection of commercial power abroad.

 

German authorities began drafting restrictions on state-sponsored investments after a Russian state bank bought a stake in the aerospace conglomerate that owns plane maker Airbus. U.S. lawmakers are examining whether tighter restrictions are needed, too.

 

"The Russians have a pattern of being very aggressive in using their assets in pursuit of policies unrelated to economics," says Sen. Evan Bayh, an Indiana Democrat. "It would be naïve to accept an investment from the Russians without worrying about what strings would be attached."

 

Russia's emergence as a major international investor is another example of how the explosion in commodity prices is remaking the world's economic map. President Putin -- who is expected to become prime minister, a perch from which he is likely to remain the nation's dominant politician -- is bequeathing to his protégé a Russia transformed.

 

A decade ago, Russian officials were seeking bailouts from foreign lenders as the country careered toward default. Now, thanks to a powerful economic rebound fueled by surging prices for Russian exports of oil and other raw materials, Moscow has paid just about all its debts and boasts over half a trillion dollars in reserves.

 

Looking to get a better financial return on some of those assets, Russia now is following Norway, China and a number of Persian Gulf oil states in setting up sovereign wealth funds. World-wide, these pools of government assets have a total value of as much as $3.5 trillion. Though so far invested only in conservative holdings like government bonds, Russia's National Wealth Fund plans to take stakes in foreign companies in the hopes of earning higher yields starting as early as this fall.