SWFs Join The Fray

Ashby Monk

After withdrawing and regrouping in 2008 and the early part of 2009, SWFs appear to be returning to the fray. According to Lina Saigol of the FT:

“Sovereign wealth funds are regaining their appetite for deals in western markets after making the lowest number of foreign investments during the first quarter since 2005…”

To be sure, it has been a remarkable few months, as certain funds (e.g. the CIC) have really come back to life. However, while these SWFs are back in the fray, it is also interesting to note the many new SWFs that are joining (or are about to join) the fray for the first time in 2009.

Over the past year, governments around the world have floated proposals for new SWFs. Indeed, the recent Scottish proposal for an oil fund is one of many. Other funds that have been proposed or implemented in 2009 include:

1) CIC 2.0: A draft proposal was submitted to the State Council for approval to establish a domestic-oriented SWF with around $7 billion dollars.

2) Hassana Investment Company: Saudi Arabia—which is already a major player in global capital markets through the Saudi Arabian Monetary Authority and the Public Investment Fund—unveiled plans in March to set up the Hassana Investment Company. According to the Saudi Press Agency, Hassana’s mandate will be to manage the assets of the General Organization for Social Insurance.

3) Sanabil al-Saudia: Yet another Saudi Arabian SWF, Sanabil al-Saudia will have an initial capitalization of $5.3 billion and begin making investments—facilitated by external advisers—by the end of the year. It will be a portfolio manager for the Public Investment Fund and will have a global mandate across a broad range of asset classes.

4) Le Fonds Stratégique d’Investissement: While French President Nicolas Sarkozy actually announced the creation of the strategic investment fund in November 2008, much of the SWF has been built in 2009.

5) Fundo Soberano do Brasil. The new Brazilian Sovereign Fund is focused on facilitating Brazilian economic development. Indeed, it will be used to help firms increase their trade and expand abroad in addition to defending the country from future financial crises. The fund will focus its investments on corporate debt instruments rather than equity stakes in firms, according to the Sovereign Wealth Fund Institute.

6) Strategic Investment Fund: The UK Government announced the creation of a ‘strategic investment fund’ worth roughly one billion dollars that will look to invest in domestic technology firms. The rationale for this fund is to protect the UK’s tech industry during the financial crisis.

7) 1Malaysia Development Berhad: Originally the Terengganu Investment Authority, Malaysia will be taking over and restructured the SWF into one that is wholly-owned by the Malaysian Ministry of Finance and reports directly to the Prime Minister.

‘8) Aboriginal Future Fund: South Australia’s Commissioner for Aboriginal Engagement, Klynton Wanganeen, wants a SWF to help Aboriginal communities support themselves instead of relying on welfare. The new fund would be based on mining royalties and land tax revenue and run by the State Government.

9) Abu Dhabi: I include AD simply to remind people that it has eight (!) SWFs with varying mandates and objectives, many of which were created in the past few years.

In addition to the above, there has also been some official chatter in India, Japan and Thailand that a SWF may be forthcoming.

5 Responses to “SWFs Join The Fray”

  1. 1 rien huizer August 18, 2009 at 10:16 am

    What is better: sovereign wealth or sovereign debt? Democracies prefer debt, others wealth? Sorry for the Scots of course . Anyway, would a regional fund like a hypothetical Scottish fund be an SWF? Like Alberta, Alaska the South Australian Aborigines, the Scots are not internationally autonomous. The central government has the powers of taxation.

  2. 2 Ashby Monk August 18, 2009 at 1:08 pm

    Given that Alaska was part of the IWG that came up with the Santiago Principles, I’d go with calling the regional funds SWFs. But I take your point.

  1. 1 Mongolia’s Bright Idea « Oxford SWF Project Trackback on September 14, 2009 at 2:11 pm
  2. 2 Angola is Gearing Up « Oxford SWF Project Trackback on November 9, 2009 at 3:14 pm
  3. 3 Five Stories to Remember from 2009 « Oxford SWF Project Trackback on December 22, 2009 at 3:37 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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