GCC SWFs: Sleepy Giants?

Ashby Monk

Corporate Financing Week has an article out this week in which it compares GCC SWFs to Asian SWFs. According to the article, the former look like “sleepy giants” when compared to the “story of growth” experienced by the latter.  This seems like a bit of a stretch. Nonetheless, if you compare Istithmar to the CIC, you can see their point.  

However, I don’t think the issue here is really about GCC vs. Asia, it is more about leverage. Those funds that were levered are struggling; with Istithmar we may end up seeing the first SWF to be liquidated. Those funds with unconstrained cash, such as the CIC, are well positioned to grab deals in the aftermath of the crisis. This was a point made by Rachel in her post last week.

Anyway, CFW’s point appears to be based more on future sources of capital than on current investment activities:

“The big difference between Asian and GCC SWFs is the sustainability of their growth model. Regardless of short-term oil price action, SWFs whose resources are based on a commodity, which is propped up in part by Opec’s continued supply management instead of sustainable demand, are unlikely to flourish in the medium-term.”

Given that China continues to set forex reserve records, this seems a fair point to make.

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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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