Protectionism Minimizes SWF Losses?

Ashby Monk

Lou Jiwei recently shared credit for the CIC’s 2008 out-performance with…the Europeans. Lou suggested that it was their penchant for protectionism that led him to avoid the jurisdiction altogether last year, which proved extremely wise given the widespread losses during the year:

“…I am grateful to their protectionism. Thanks to this, I didn’t invest a penny in Europe last year.”

There is likely some truth to that. However, as I argued in a previous post, it was also the poor investments made by the CIC in 2007 that saved it from incurring further losses in 2008:

“Another (albeit more cynical) interpretation would be that the CIC got burned on its first two major overseas investments and was forced to take a time-out before making any more investments. It was during this time-out that global financial markets collapsed. Indeed, even if the Blackstone and Morgan Stanley deals never make money, they may still be viewed as home runs for the simple reason that they likely prevented the CIC from losing much, much more money in a disastrous market.”

Whatever the reason for the CIC’s performance in 2008, it looks like they will be expanding their EU investments in 2009. Given how much has changed since 2007, it will be interesting to see how these investments are received.

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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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