FSI Less ‘Strategic’ Than Thought

Ashby Monk

The Strategic Investment Fund will receive €14 billion worth of stock investments from the government and the Caisse des Dépôts. This transfer will bring the total size of the new SWF up to €20 billion, which was the original target for the FSI.

Maybe I’m reading too much into this, but doesn’t a stock transfer diminish the importance of FSI? In November of 2008, Sarkozy said that the fund would have €20 billion at its disposal. I interpreted this to mean €20 billion in cash. By topping up the FSI with stock, the government has in effect tied the new SWF’s hands. If the FSI sees an opportunity, it will be forced to sell an existing investment in a French company to raise the necessary capital.

This might be a sign that France is not as enamored with their SWF as we might have thought. Alternatively, it could mean that the government cannot find the cash to fulfill its commitment to the fund. Either way, the FSI won’t have as much cash on hand to invest in the French economy as some of us had originally thought.

(h/t fonds souverains)

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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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