A Captivating Conference in Kuala Lumpur

Ashby Monk

The Institutional Investor Asia & Middle East Government Funds Roundtable in Kuala Lumpur is now over, and, I’m pleased to report, it was more than worth the long trip out to Malaysia. The range of panels and breakout sessions was timely and compelling. I was kindly invited to moderate a number of them, which was quite a bit of fun. In addition, as someone who writes (almost daily) about these funds, it was very cool to be able to engage with many of the leading lights in the field in one go. (I think there were something like 70 SWF officers at the meeting.) Anyway, topics ranged from the pros and cons of in-sourcing certain asset management functions to new strategies for investing in emerging and frontier markets. All credit to the organizers for keeping our attention for two full days; that’s definitely not easy.

Now, I’d love to share all the details of what took place inside the meeting rooms, but the Roundtable is totally private and excludes media (and bloggers!). The expectation for privacy seemed to go well beyond the Chatham House rule — I’d have call it more of a ‘Las Vegas Rule’ (i.e. ‘what happens in the meetings…stays in the meetings’). And, to be fair, I get that. It’s not that any of the speakers are divulging national secrets, but the individuals at these events should be able to speak freely without fear that their ideas will wind up in press reports. So, perhaps to your chagrin, I plan to hold up my end of the bargain and withhold all specifics.

However, what I will offer you are four generic impressions I have about the government funds community after having been present at the conference. To be clear, the below points represent my views and interpretations alone:

1) Loss Leaders: I couldn’t help but think that there may be a place for SWFs to make “loss leading” investments in emerging and frontier economies in order to open doors and create opportunities for future return generating investments. In other words, because SWFs have a long-term focus…longer than any other institutional investors…perhaps it is in their interest to, say, invest in some African countries under the assumption that they will lose money now but will gain knowledge and contacts which will, down the road, lead to very attractive investment opportunities and financial returns. I’m not sure if funds have given any thought to this, but it seems like a potentially interesting long-term strategy, especially since the investment business appears to be so dominated by relationships and mutual trust.

2) Partnerships: I think we can expect to see SWFs forge more and more partnerships with one another and with foreign governmental agencies. I get the sense that the ‘powers that be’ at SWFs understand all too well the importance of ‘local knowledge’ in making investments in emerging and frontier economies. The point here is that these types of investments have so many hard to quantify characteristics that a fund literally has to have boots on the ground to understand what it is getting into.

3) Toolkit: The folks that are setting up new SWFs are getting really good advice on how to go about setting up their funds — both from the service providers and other SWFs (and now the US?). The new SWF sponsors clearly recognize the key challenges in setting up a successful SWF. Implementation won’t be easy, as these technocrats still have to deal with government officials, but it still bodes well for the long-term success of these funds at meeting their objectives.

4) Learning Organizations: For mature SWFs to remain on top of their game, they need to be dynamic learning organizations. This is something I pointed out in my post earlier in the week on the Future Fund, but it was something that also came through quite clearly in these discussions. Being a good steward of the public purse necessitates ongoing ‘professional development’ and education. In this regard, the Roundtable was probably quite beneficial, and I suspect the funds got a lot out of it.

Anyway, big thanks to the organizers for including me in the proceedings. I have to say, I’m now looking forward to the Africa Roundtable in Tunis in March. I’m keen to learn more about the ‘frontier economies’ of Africa. Maybe I’ll see you there…

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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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