We’re Not Selling…As Far As You Know

Ashby Monk

For the secretive bunch that they are, SWFs have been uncharacteristically vocal about their investment strategies as of late. It seems every time I pick up a newspaper, I find myself reading a story about some SWF that has decided NOT to sell this or that asset.

Apparently, SWFs are not selling their euro reserves. Nor are they selling European investments. Moreover, they are not selling their BP shares. And, in case you missed it, they’ve decided not to sell their Israeli investments. (And there are plenty of other examples.)

What gives? Why are SWFs telling the world about their current plans and policies? After all, these funds have argued against increasing transparency on the grounds that it would give away too much information about their current plans and policies and lead to front-running.

The obvious reason is that SWFs are trying to stem their losses. When the world thinks SWFs might be selling euro assets, the euro’s decline seems to accelerate. But when SWFs affirm their support for euro assets, the market seems to stabilize. This principle holds true in a variety of settings; for example, Kuwait’s comments about BP seem to be going over well this morning.

So, SWFs are being quite strategic with their communications strategy. If transparency improves returns (or stems losses), they appear to be all for it. But, believe me, if these funds were selling these assets, they’d surely keep that information to themselves.

All that being said, pundits and analysts have forced many SWFs to disclose their current thinking. There have been plenty of (unfounded) speculations about what SWFs are doing…and these speculations can move markets. As such, SWFs are forced to tell the markets what the markets want to hear to return some notion of stability. The real question, then, is whether the SWFs actually mean it when they say, ‘we’re not selling’.

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About

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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