I’m going to (try to) take a real vacation until the end of the new year. No SWF reading. No SWF writing. No SWFs at all. See you in 2011!
Archive for December, 2010
Tags: Oxford SWF Project
Tags: news, Sovereign Wealth Fund, Sovereign Wealth Funds, SWF, SWFs, Top 10 Tweets, Top Ten Tweets
- Sorry, CIC 2.0 isn’t really a SWF. Big let down, I know. Here is my post from months ago.
- KIC and Mubadala alone at top in terms of cooperation. These two have joint-investments with SWFs all over the place!
- It kind of boggles the mind that Norway’s GPF-G is just now getting into real estate.
- Before QIA makes this investment it may want to ring up Temasek. #duediligence!
- GIC is interested in distressed shopping malls in Australia. Who wouldn’t be?
- Dubai World’s new Chairman — Sheik Ahmed bin Saeed Al Maktoum — is looking to shape things up. #toughjob
- Future Fund buys into my least favorite London airport.
- Temasek is banking on…or rather in…Vietnam.
- China-Africa Development Fund buys into South African platinum sector.
- SWF word association: I say, London Real Estate. You say…?
Tags: India, Sovereign Wealth Fund, Sovereign Wealth Funds, Strategic Petroleum Reserve, SWF, SWFs
Here we go again. India’s Financial Express has a story that reads as if it was filed last summer and the Editor just got around to hitting “publish”:
“The government is planning to set up a sovereign wealth fund (SWF) to acquire oil and gas blocks abroad…The National Manufacturing Competitiveness Council is examining the feasibility of setting up an SWF to acquire raw materials and assets from abroad not only in the energy industry but across all sectors. We are awaiting their recommendations,” said Vivek Kumar, joint secretary, petroleum ministry.
Recall that the idea for an Indian SWF has been popping up for over a year but was (ostensibly) “abandoned” in August. Well, according to this article, the key drivers underpinning this now resuscitated SWF will be to:
- joint-bid on commodity assets with countries like China;
- engage in oil diplomacy with resource rich countries; and
- collaborate with the private sector to gain access to resource technologies.
It’s perhaps understandable that this debate has been rekindled given that these comments were made at a roundtable on “overseas energy acquisition to ensure India’s energy security”. And given the spate of investments by the Chinese funds in commodities and minerals around the world, I can understand why other countries would be interested in getting involved. After all, Japan recently said it was considering a new SWF to make investments in the global resource industry. Perhaps these nation states are coming to the realization that they cannot rely on their private sectors to ensure energy security and independence?
After all, there must be a good reason why the US government has the strategic petroleum reserve (SPR), which is the single largest emergency supply of oil in the world and is valued at…wait for it…almost $100 billion! The SPR was set up in 1975 after the oil crisis disrupted supplies to the United States. Should we perceive this US pool of real assets accumulated for a crisis any differently than a pool of financial assets for the same purpose? I recognize the SPR isn’t a SWF; it’s kinda the opposite actually in that it’s investing financial capital in stuff you put in the ground. But, ultimately, the US government has made the decision to stockpile assets for a rainy day (i.e. future oil crisis). Other governments should probably be allowed to do the same, no? (I recognize that might mean stepping outside a couple of the guidelines in the Santiago Principles, but I’m nonetheless interested in thinking this through.) Maybe we should just call India’s new SWF the Strategic Petroleum Reserve Fund and let them get on with it? Cogent thinking on this topic welcome!
Tags: africa, China, Martyn Davies, OECD, Sovereign Wealth Fund, Sovereign Wealth Funds, SWF, SWFs
The always interesting Jamil Anderlini strikes again this morning with a story about China’s attempt to win “friends” in Africa. Drawing on observations from the Ceremony for China-Africa Friendship Awards, he suggests that “China obviously thinks it has an image problem in Africa.” The topic is all the more pertinent given that this week saw a whopping billion dollar investment by a Chinese consortium, which includes the China-Africa Development Fund, in a South African platinum explorer.
Anyway, the Anderlini article reminded me of a line out of a fascinating new paper I just read by Martyn Davies of the OECD entitled ‘How China is Influencing Africa’s Development‘:
“The Chinese Government’s brazen corporatist approach to engaging Africa is being actively downplayed through political rhetoric that appeals to a political solidarity that China has with Africa as well as the ramping up of aid to African states.”
In other words, Anderlini and Davies agree: China is trying hard to change its image and make nice in Africa. And it looks to me as if the jury is still out on this topic. Here’s how Davies concludes his paper (which, by the way, is well worth your time to read):
“I do not believe that we as Africans have even begun to comprehend the long-term strategic implications of China’s growing commercial presence in Africa. A shift in Africa’s economic relations is occurring – away from traditional economies toward the east and China. This force has not been created by the current crisis that is inflicting western economies, but it has definitely accelerated it. The developmental impact of this shift in Africa will begin to become clearer as the depth of China’s commercial penetration becomes greater.”
So, basically, Davies says, ‘Watch this space!’ At least there’s plenty to watch:
Tags: New Mexico, Sovereign Wealth Fund, Sovereign Wealth Funds, State Investment Council, SWF, SWFs
Given that I’ve been at this blog for over two years, I find it a bit odd that I’ve never found a reason to write about New Mexico’s SWF. I’ve mentioned it in passing – such as noting that it’s the third oldest in the world or that it is one of five SWFs sponsored by American states – but I’ve never written a post specifically about the fund. Do you realize that this fund is bigger than the New Zealand Superannuation Fund? Well, New Mexico’s time has come, as its SWF – known today as the State Investment Council (SIC) – has officially done something to warrant attention: Winthrop Quigley of the Albuquerque Journal has just published an in-depth article on the fund.
What’s the scoop? Apparently, after sub-par returns (against a variety of benchmarks) for over a decade, a new management team was recently hired to turn the place around. The team is anchored by the new State Investment Officer Steven Moise and his deputy Vince Smith. And, now that there’s a new team running things, some of the fund’s dirty laundry is being aired out for all to see. For example, under Gary Bland, the SWF’s team apparently spent most of their time trying to pick winning stocks.
Encouragingly, the SIC’s dart throwing days are over. The new plan being crafted by Moise is focused on getting the asset allocation right instead of wasting resources on in-house trading:
“Moise and Smith say the new SIC investment philosophy holds that “asset allocation is the primary determinant of portfolio return” and that fund manager performance “has the least impact on long-run portfolio returns.” That is the opposite of SIC practice when Gary Bland was state investment officer…
The SIC staff is being reassigned to focus on asset allocation, understanding economic trends, identifying ways to take positions in assets they believe will deliver the best performance and research markets”
That is eminently sensible. I’ve heard a number of different stats used, but most investors will tell you that the asset allocation decision drives something in the range of 70-90% of a fund’s overall return (and yet it is far too often discounted in the decision-making process in favor of sexier trading operations).
Under Moise, the SWF also plans to focus on its comparative strengths (e.g. it’s long-term time horizon) as well as implement sound investment governance policies. Here’s Quigley with some highlights:
“SIC plans to increase its investments in real estate and find ways to invest in timber land, infrastructure, farm land, energy-related assets and non-energy commodities. These assets should provide stable value and generate income, Smith said…
Moise plans to raise the fees paid to advisers and hold them much more accountable than the SIC did in the past. “You can’t get the best in class if you don’t pay for the best in class,” he said…
“Believe it or not, we never had an investment committee,” Moise said. The staff and the council each have investment committees now…
There are plans to “to introduce legislation in January’s session to remove the governor as SIC chairman. As chairman the governor is responsible for investment decisions, Keller said. “I don’t know why any governor would want to be on the hook for every investment decision for the state,” he said. Removing the governor as chairman also depoliticizes the SIC decision making…
Moise said SIC staff won’t pick individual economically targeted investments any longer because they don’t know how to do it. Instead, those kinds of investments will be placed by venture-capital and other firms with the expertise to identify investment opportunities and to help startup companies succeed, he said”…
Anyway, all this is to say that, under the guidance of Moise, New Mexico may soon have a very well managed SWF indeed. And it only took the state 53 years to get there!
Tags: international monetary fund, research, Rodney Dangerfield, Sovereign Wealth Fund, Sovereign Wealth Funds, SWF, SWFs, Weekend Reading
After much anticipation, the IMF has finally released its edited volume on SWFs entitled “Economics of Sovereign Wealth Funds: Issues for Policymakers.”
I wasn’t on the IMF’s pre-publication marketing distribution list, so I don’t have a copy yet (…cue Rodney Dangerfield impression…) and thus can’t really comment on the book’s contents.
But I can tell you that my buddy Andrew Rozanov (who authored one of the chapters) has a copy and says it’s awesome. So, I’ll be dutifully purchasing my copy this weekend.
Given that past IMF work in this domain has been fantastic, I’m sure I’ll be returning to the book on this blog in the future.
Enjoy your weekend!
Tags: news, Sovereign Wealth Fund, Sovereign Wealth Funds, SWF, SWFs, Top 10 Tweets, Top Ten Tweets
Here they are: your top news items from the past week’s @sovereignfund feed:
- KIC Gets $3 billion cash top up.
- Ghana thinking of giving up its plan for a new SWF. May opt for borrowing and spending. I.E. the opposite of an SWF.
- The good news? You’ve got more than $500 billion. The bad news? It’s hard to keep track of it all.
- An argument against SWFs.
- CIC’s Jin Liqun says China has set up China-ASEAN fund to finance infrastructural development in ASEAN countries.
- #WikiLeaks: Mervyn King thought SWFs could help to bail out banking sector in 2008. #LONDON000797
- I cannot think of anything SWF communications teams would want less on a Monday morning than to be dragged into the Madoff mess.
- Observation: Consultants often make outrageous predictions to get free PR. Case in point.
- Is Nigeria’s Excess Crude Account rebounding? Yeah, it kinda is. It helps that oil is $90 per barrel.
- New Zimbabwean SWF: A Diamond in the Rough?
Tags: Government Pension Fund Norway, GPF-G, Norway, Sovereign Wealth Fund, Sovereign Wealth Funds, SWF, SWFs
Is it the severe jet lag (I haven’t seen a bed in 40+ hours) or am I actually reading a new research report on Norwegian ethical investment lapses? Hard to believe, but EarthRights International has published a 40 pager specifically targeting the Norwegian SWF for unethical investment behavior. Honestly, I can’t think of a single fund that I would expect this to happen to less. No other SWF takes ethical investing as seriously as Norway’s. What gives?
“…the Norwegian Pension Fund-Global, the world’s second largest sovereign wealth fund, invests in companies that are contributing to severe human rights abuses in Burma, as documented through clandestine investigations by my colleagues and I over the last several years. This puts the Fund in violation of its own standards…our new report essentially screened 15 companies and found that the Fund’s holdings in the companies put it in violation of the Ethical Guidelines. The companies named in the report are some of the world’s biggest, hailing from eight countries, including the US (Chevron), France (Total), South Korea (Daewoo International), China (PetroChina), India (GAIL), and Thailand (PTT/PTTEP).”
So it’s investing in some big conglomerates that do some business in Burma. OK. What say you Norway? The Ministry of Finance (which has purview over investment exclusions) had this for a rebuttal:
“The Fund is invested in some companies, listed elsewhere, that have activity within Burma…The extent of the GPFG’s investments in Burma is therefore sometimes misinterpreted, as the investments refer to multinational companies with activities in many countries and regions…The fact that a company has operations in states controlled by repressive regimes does not, in itself, constitute sufficient grounds to exclude a company from the Fund.”
I’m literally too tired to delve into the nitty gritty here. However, as Gordon and I have argued, domestic legitimacy of the SWF is predicated on the idea that the fund is an ethical investor. So that means EarthRights can potentially inspire some change by threatening the fund’s domestic support through a splashy negative ethics campaign.
In other words, Norway’s SWF is being targeted as much for it’s positive ethical qualities as it is for any negative ones. After all, Chevron has many investors, but there is only one worth half a trillion dollars with a flourishing ethical investment policy that has a track record of divesting “unethical” companies.
Tags: Bank of Korea, Korea, Korea Investment Corporation, Sovereign Wealth Fund, Sovereign Wealth Funds, SWF, SWFs
There are plenty of countries taking money out of their SWFs these days. Korea, apparently, is not one of them, as the Korea Investment Corporation is about to get a top-up of $3 billion. Here’s a representative from the Bank of Korea talking about the decision to give the KIC more money in the WSJ:
“We’ll sign a contract with KIC at the earliest possible time…Korea Investment Corp. has built a track record in investments in public markets over the past years and the size of our foreign exchange reserves has increased in the past year. So, we decided to pour more money into it.”
Clearly Scott Kalb and the folks at KIC have managed to come through the global financial crisis with their domestic legitimacy intact. Given that the fund was established just before the crisis hit (in 2005), things could have definitely gone the other way. Good work!