What Are Your Intentions?

by Ashby Monk

In many of our discussions with policy makers to date, one question has continuously been raised: What are SWFs’ intentions? In other words, many would like to have a better understanding of the goals and objectives of these government controlled investment funds.

As I discuss in my working paper, in order to understand intent we must understand why an institution was originally constituted. A pension fund, for example, is set up for the express purpose of accumulating and investing financial assets. These assets are then used to ensure old age financial security for retirees. This grounding serves as a guiding principle for the organization and dictates the investment philosophy and strategy required.

SWFs are different. Most were set up in response to the accumulation of financial capital. According to Keith Ambachtsheer, this has left many SWFs looking like ‘accidental financial tourists’. SWFs are not seen to have an easily identifiable goal or obective with which to infer current and future investment strategies.

In order to get a better sense of the CIC’s intentions, I went back and rewatched the Charlie Rose interview with Jesse Wang that appeared in July 2007. One does get a clear sense that the CIC was originally constituted to acheive commercial goals, but the investment philosophy was not yet established. This lack of clarity of mission may be partly responsible for the CIC’s legitimacy problems in certain jurisdictions.

Significantly, the Chinese may be working to resolve this: “Supervisory departments” are (rumored to be) thinking about stripping Huijin from the CIC in order to give the latter institution a more easily identifiable mandate (e.g. commercial investing). If true, this would clearly facilitate understanding of the CIC’s intentions…and resolve some, if not all, of the US concerns.

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About

This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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