SWF Transaction Update (and a Short Rant)

Monitor has just released its latest report on the investment behavior of SWFs. As usual, it’s a very interesting read with lots of transactional data for each fund broken down according to sector and geography. Here are some of the main findings:

“During H1 [i.e. the first half of] 2010, 16 of the 33 funds on the Monitor-FEEM SWF Transaction Database executed 92 investments valued at $22.2 billion: a 20 percent increase in deal volume, but less than 40 percent of the value of SWF investments in H2 2009. Compared to H1 2009, SWFs doubled the number and investment value of deals in H1 2010.”

And which funds are the most active?

“The most active funds were Temasek Holdings (20 deals), the China Investment Corporation and the Qatar Investment Authority (both 14 deals). CIC and QIA were the largest spenders accounting for a third and a quarter of the total SWF investment value, respectively, and eight of the ten largest investments for the period.”

And, so, what should we make of all this? Heres Senior Partner at Monitor Group William Miracky:

Sovereign wealth funds confidence in global markets seems to be on the rise, and the increase in the number of investments in H1 2010 compared to a year earlier is an encouraging sign.

It is an encouraging sign!

However, I feel obliged to point out that there has been an uptick in SWF paranoia over the past few weeks, which may (if it persists) limit the percentage of these growing number of SWF transactions taking place in the West. For example, this Rolling Stone article uses hyberpole and quite a bit of foul language (Im no prude, but using the F word in an article where serious accusations are being made just seems off to meeven if I do love Goodfellas). Why? The author wants to make SWFs look like bad guys that are in with mob. And for what purpose? To highlight the ridiculousness of foreign governments paying for American infrastructure. While it may be ridiculous, the US still desperately needs these investments (last I checked, our infrastructure was in need of some serious improvement), and it wont help matters by scaring off potential investors with this foul mouthed rhetoric. Moreover, the parking meter deal that actually sparked this Rolling Stone tirade actually wasnt as awful as suggested; the guy just doesnt understand the concept of discounting. And, by the way, this xenephobia does affect SWFs behavior; read these comments from Gao Xiqing in todays Globe & Mail.

Aaaaaaaanyway, enough ranting, let me get back to the Monitor report because its worth reading. In particular, I really enjoyed the short article on the new trend of SWFs raising capital in private markets, which I have sneaking suspicion was written by Monitors Victoria Barbary

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