William Miracky at SAIS

By Brett Keller

William Miracky followed Edwin Truman at the September 17th lunch panel hosted by the International Finance Club at the Johns Hopkins School of Advanced International Studies (SAIS), an event titled “Sovereign Wealth Funds: Assessing the Risks and the Opportunities.” (Read the post on Truman’s comments). Miracky is a senior partner at the Monitor Group, which released its report on SWF behavior in June 2008.

Much of what Miracky discussed at first was summary of the Monitor report, which is an invaluable resource on the public behavior of sovereign funds. Miracky expressed that their desire was to “bring some actual facts to this issue, rather than speculating about investment behaviors.” In all, they examined 17 active funds making a total of 785 deals which included $250 billion in investments. As most of the media coverage and analysis focuses on “uphill” investment from sovereign funds from the Middle East and Asia, one notable finding is that sovereign funds do invest a substantial portion of their resources in emerging markets.

Miracky got a good laugh when describing the Monitor report’s requirement of actual sovereign state control for its definition of SWFs. He said, tongue-in-cheek, “So, we excluded Alaska, which is notwithstanding the current surge in the level of interest in the activities of the government of Alaska.”

This is one area where I think it’s difficult to generalize—as Miracky admitted, some of the data is skewed by the atypical behavior of one fund or another. For example, Temasek invests back heavily in Asia. But it is true that the funds aren’t all going to OECD countries.

Miracky said that SWFs are actively avoiding a “PR problem or a regulatory backlash,” and that part of the evidence is “where and when they take controlling stakes.” In general, SWFs avoid taking controlling stakes in industries that would alarm OECD citizens. Also, the Monitor report concluded that recent heavy investments in financial services in the US and Europe were “atypical and opportunistic,” reflecting the 2007-8’s credit crunch.

The most interesting part of Miracky’s talk came when he previewed some Q2 2008 data that Monitor hasn’t released yet. More on that data as soon as it is released.

In conclusion, Miracky noted that he thinks the risk that is being underplayed is the financial risk of investment by sovereign funds, not the political risk. Policy makers should be “driving the policy remedies to help guard against the potential impact of those risks.” Also, voluntary or regulatory frameworks must deal not just with transparency, but also with accountability, risk management, and professional accountability. Overall, Miracky sounded confident that, with the proper agreements in place, sovereign funds can be a “force for good and a force for the flow of capital around the world.”

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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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