Withdraw and Regroup?

Ashby Monk

After the financial roller coaster of the past two years, many SWFs had simply decided to withdraw and regroup; their risk appetites disappearing in the face of considerable losses. There are indications that this is now changing, and SWFs’ appetite for risk may be resurfacing. Nevertheless, asset management policies within this funds may have been permanently altered:

“It is more than likely that the targets they will choose eventually would have specific strategic significance for their own economies,” said Mirtchev, who is also a senior economic adviser to the Kazakh prime minister.”

I agree. On the one hand, these funds are increasingly inward looking; contributing to the domestic stimulus packages in various countries. On the other hand, having been burned in the financial sector, it looks as if some SWFs will shift their focus towards strategic resources.

“Singapore’s Temasek, like other Asian and Middle Eastern sovereign wealth funds, is digging for deals in mining and oil, as it licks its wounds from financial sector investments that have soured in a global crisis.”

These two trends–domestic aid and strategic investing–are revealing of the relationship between SWFs and their sponsoring governments. Rather than being independent institutions with a clear mandate to ‘generate returns’, many SWFs look very much a part governments’ broader domestic and geopolitical tool kit. Indeed, the SWFs’ mandates appear much more complex than simply investing assets for profit…

2 Responses to “Withdraw and Regroup?”

  1. 1 alex April 8, 2009 at 9:51 pm

    I cannot agree more with Ashby’s conclusion on the role, of SWFs in the domestic market. Having highlighted the Kazakh government for example which is taking this seriously, to the extents of restructuring the Sovereign Fund — Kazyna Sustainable Dev’t Fund into Samruk-Kazyna, thus giving it the asset management mandate of public resources which include not only small venture capital funds but also large stakes in the local market. And all this happened before the crisis had spread into these markets.

    Perhaps it is time for those who seek SWF mandates to develop some domestic partnerships if they ain’t there yet.

  1. 1 QIA Changes Strategy from ‘Do Nothing’ to ‘Do Something’ « Oxford SWF Project Trackback on November 10, 2009 at 3:34 pm

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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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