|
|
“Sovereign Wealth Funds” should have been the words of 2007, not “sub-prime” as reported in many newspapers at the end of the year!
The above was the heading of my New Years message and prompted quite a few enquiries requesting information as to “What are Sovereign Wealth Funds (SWF)?”. My answer has to be--they are just another source of capital available for investment globally, as was so readily exploited by the likes of UBS, CitiGroup and Merrill Lynch as the extent of their problematic exposure to “sub-prime” debts became apparent. |
Rupert Neil Bumfrey
Investment Management Consultant, Emerging Markets, GCC/Middle East; Sub-Continent & CIS |
Without the prompt, positive responses of the SWF’s, in what must have been record time, the Global Investment Banking landscape would have been altered immeasurably and how would the world have coped with that? Possibly a repeat of the Asian Banking Crisis of the 1990’s is too hard to contemplate!
There are, however, very contrasting views of SWF’s most easily highlighted by the two tables below:
| Sovereign Wealth Fund Projections
Source: The Market Oracle article:
"United States Transfer of Sovereignty to Sovereign Wealth Funds"
http://marketoracle.co.uk/Article3239.html |
|
Sovereign Wealth Funds |
Estimated Value End 2007 |
2008 New Money |
| Abu Dhabi |
$1,000 billion |
$100 billion |
| China |
$600 billion |
$200 billion |
| Norway |
$350 billion |
$20 billion |
| Russia |
$150 billion |
$75 billion |
| Singapore |
$500 billion |
$50 billion |
| Kuwait |
$100 billion |
$10 billion |
| Saudi Arabia |
$400 billion |
$600 billion |
| Japan |
nil |
$200 billion |
| Totals |
3,100 billion |
$1,255 billion |
|
|
Largest Sovereign Wealth Funds
Source: http://en.wikipedia.org/wiki/Sovereign_wealth_funds |
|
Country |
Fund |
Assets $Billion |
Incep-
tion |
Origin |
Approx wealth
per citizen |
|
Abu Dhabi |
ADIA Abu Dhabi Investment Authority |
$1,300 |
1976 |
Oil |
$1,529,000 |
|
Singapore |
GIC Government of Singapore Investment Corporation |
$330 |
1981 |
Non-commodity |
$100,000 |
|
Norway |
GPF The Government Pension Fund of Norway |
$315 |
1990 |
Oil |
$71,000 |
|
Saudi Arabia |
Various |
$300 |
n/a |
Oil |
$15,000 |
|
Kuwait |
KIA Kuwait Investment Authority |
$250 |
1953 |
Oil |
$250,000 |
|
China |
CIC China Investment Corporation |
$200 |
2007 |
Non-commodity |
$151 |
|
Russia |
SFRF Stabilization Fund of the Russian Federation |
$158 |
2004 |
Oil |
$1,180 |
|
Singapore |
Temasek Holdings |
$150 |
1974 |
Non-commodity |
$30,300 |
|
Australia |
FFMA Australian Government Future Fund |
$61 |
2004 |
Non-commodity |
$2,900 |
|
Qatar |
QIA Qatar Investment Authority |
$50 |
2000 |
Oil |
$250,000 |
|
US (Alaska) |
APFC Alaska Permanent Fund |
$40.1 |
1976 |
Oil |
$61,000 |
|
Libya |
- |
$40 |
2007 |
Oil |
$7,200 |
|
Brunei |
BIA Brunei Investment Agency |
$30 |
1983 |
Oil |
$90,100 |
|
South Korea |
KIC Korea Investment Corporation |
$20 |
2005 |
Non-commodity |
$417 |
|
Malaysia |
KN Khazanah Nasional |
$18.3 |
1993 |
Non-commodity |
$658 |
|
Kazakhstan |
KNF Kazakhstan National Fund |
$17.8 |
2000 |
Oil |
$1170 |
|
Canada |
AIM Alberta Heritage Fund |
$16.6 |
1976 |
Oil |
$4,800 |
|
Taiwan |
NSF National Stabilisation Fund |
$15 |
2000 |
Non-commodity |
$652 |
|
Iran |
OSF Oil Stabilisation Fund |
$12.9 |
1999 |
Oil |
$174 |
|
All the figures are primarily anecdotal, but the first table is headlined by “United States Transfer of Sovereignty to Sovereign Wealth Funds”, whereas Wikipedia apolitically states “Sovereign wealth fund,” so we can see there is a debate about the suitability and the influence of SWF’s.
My own view, for what it is worth, and do bear in mind the very global nature of the SWF’s in Wikipedia’s table, is that SWF’s should be seen in the same context as all those centuries ago when the New World, the America’s, were being discovered and colonised by Europeans.
Queen Elizabeth I, the Virgin Queen, along with many members of her Court, financially sponsored the expeditions of Raleigh and Drake; ultimately, this resulted in the establishment of USA and Canada, whereas south of the Rio Grande, Portugal and Spain agreed to the division of South America, hence Brazil being the largest Portuguese speaking country.
SWF’s are part of the remorseless cycle of economic history and should be applauded for looking beyond their fairly limited economies and investing their capital surpluses globally. As can be seen the surpluses have been derived from Oil, but where are the prices for oil set, in the western financial markets, with the consumerism of the West contributing to the emergence of China’s vast foreign exchange surplus.
Is the West prepared to forego the delights of consumerism? Is the hydrocarbon industry pricing their extracted product? If the answers to these questions is “yes”, then SWF’s will diminish in influence, but the reality is actually “no”, so I would urge the world to embrace SWF’s and not seek a return to the protectionist days of Gold Standard or Gunboat diplomacy.
---
Read more about the author at: http://www.linkedin.com/in/rupertneilbumfrey
Daily Middle East Business stories by the author can be subscribed and accessed through this link: http://community.icontact.com/p/rupertbumfrey |
|
