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CURRENT NEWS
1/4/2009
Kuwait bourse fund targets long-term investments -KIA
Reuters reports that, "a Kuwait government fund launched to stabilise the Gulf state's bourse was seeking long-term investments in stocks, the managing director of the Kuwait Investment Authority (KIA) said on Sunday.
In November, Kuwait asked its sovereign wealth fund KIA to set up the fund to shore up the second largest Arab bourse , which fell 38 percent last year during a regional stock market rout triggered by the global financial crisis.
The fund, which started operations on Dec. 24, was seeking long-term investments, Bader al-Saad said at a news conference on Sunday.
Kuwaiti Minister of Finance Mustapha al-Shamali said last month the fund would invest least 1.5 billion dinars ($5.42 billion)."
read more: Reuters
1/2/2009
Norges Bank will not purchase foreign exchange for the Government Pension Fund – Global in January.
The Norwegian SWF is administered by Norges Bank Investment Management (NBIM), a division of the Norwegian Central Bank.
According to the Press Release by Norges Bank, "the Fund’s foreign exchange requirements are partly met by the state’s direct financial interest in petroleum activities (SDFI) and partly by Norges Bank’s purchases in the market.
The Ministry of Finance determines the size of the monthly allocations to the Fund. Norges Bank’s purchases of foreign exchange are equal to the difference between the allocations and the SDFI’s estimated foreign exchange revenues. Adjustments are made for any revisions of estimates for the previous month. As a result, the daily purchases may vary from one month to the next. The daily foreign exchange purchases are determined for a period of one month at a time and are published on the last business day of the preceding month."
read more: Norges Bank
1/2/2009
SR720 Million Deal Signed to Produce Seamless Pipes in Saudi Arabia
A long-term SR720 million financing agreement was signed here by Jubail Energy Services Company (JESCO), a subsidiary of the Industrialization and Energy Services Company (TAQA), and the Public Investment Fund (PIF), a state-owned organisation established by a royal decree to provide finance to commercial ventures.
The funds will be used to finance part of the seamless pipe manufacturing facility being built in the industrial city of Jubail.
Hamad bin Mohammed Al Kanhal, JESCO’s board member, who signed the agreement on behalf of JESCO’s President Khalil Al Gannas, in Riyadh said that the company owns and develops all technical, financial and human capabilities required to secure a leadership position in this specialised global manufacturing sector. He added that TAQA owns 51 percent of JESCO, while the balance of the company’s share capital is owned by Saudi and foreign investors.
read more: Khaleej Times
12/29/2008
Emirates Investment Authority launches website
Profile update: It is a fund that is mandated to manage the sovereign wealth of the United Arab Emirates federal government. Established in November 2007 by Emiri decree, the Emirates Investment Authority (EIA) is the first federal sovereign wealth fund for all seven states comprising the United Arab Emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain).
The EIA is the sole entity responsible for the future stewardship of federal government stakes in over 30 corporations across the GCC, including Etisalat, Du, Gulf International Bank, United Arab Shipping Company and Gulf Investment Corporation.
The objective of the EIA is to achieve attractive financial returns and diversify the government's asset exposure by cultivating sovereign funding arrangements in tandem with first-class investment opportunities in the public and private markets of the GCC and overseas.
read more: EIA Profile
12/29/2008
Dubai Investments open to selling 40% in units
"Dubai Investments (DI) is willing to sell up to 40 per cent stakes in any of its subsidiaries when the market situation improves, a top official said. He added that the global economic crisis is not expected to have a significant impact on future cash flows.
'We are open to selling stakes in any of our subsidiaries and possible buyers could include sovereign wealth funds,' DI Chief Executive Officer Khaled Kalban told Emirates Business.
DI has also put all plans for launching initial public offerings (IPOs) for any of its subsidiaries on hold, owing to market conditions. The company, with 46 subsidiaries, had said it would launch an IPO for M'sharie, its private equity arm, within 12 to 18 months, but has put the plans on hold."
read more: Emirates Business
12/28/2008
Dow Chemical Receives Notification of Kuwait Decision to Cancel K-Dow Partnership
"Today, The Dow Chemical Company has been verbally informed by our partners at the Kuwait Petroleum Corporation (KPC) and Petrochemicals Industries Company (PIC) about a decision made by the Kuwait Supreme Petroleum Council (SPC), to reverse its prior approval of the agreement between Dow and PIC to enter into K-Dow Petrochemicals, a planned 50-50 joint venture company. The partners have informed us that there will be official written notification of the decision within the next few days.
Dow is extremely disappointed with the decision, and is in the process of evaluating its options pursuant to the Joint Venture Formation Agreement. While disappointed in this outcome, Dow remains committed to its Middle East Strategy. "
read more: DOW Chemical
12/28/2008
Vietnamese Ministry of Finance puts SOE Reform & Equitization Support Fund under SCIC’s management
SCIC reports that,"The Ministry of Finance (MOF) officially transferred management of the SOE Reform & Equitization Support Fund (the Fund) to the State Capital Investment Corporation (SCIC), pursuant to Decision 113/2008/QĐ-TTg dated 18 August 2008 of the Prime Minister."
read more: SCIC
12/26/2008
Brazil president signs sovereign wealth fund law
Brazilian President Luiz Inacio Lula da Silva has signed a law creating a sovereign wealth fund to buffer the country from the global financial crisis and help Brazilian companies boost trade and expand overseas. The presidential press office said in a statement that Silva signed the law on Wednesday and also inked a provisional measure endowing the fund with the equivalent of nearly $6 billion. The statement provided no details.
The provisional measure must still be submitted to Congress for its approval. Earlier this year, Finance Minister Guido Mantega said money for the fund would come from the federal government's primary budget surplus expected to come in at 3.8 percent of gross domestic product.
read more: The Associated Press
12/23/2008
Poll Results (October 2008 - December 2008)
Which Wall Street Firm will next be bailed out by foreign investors?
Morgan Stanley (62)
Goldman Sachs (49)
JP Morgan Chase (26)
Other (17)
Bank of America (16)
Out of 170 Total Votes, from October 2008 - December 23, 2008
12/22/2008
Wealth fund may be Madoff victim - UPDATE
New sources say, "Abu Dhabi Investment Authority, the world's largest sovereign wealth fund, said it had no direct investments in a firm managed by Bernard Madoff, a newspaper reported on Monday. ADIA was denying a New York Times report which said the fund had 'entrusted some $400 million' in a firm of the U.S. fund manager accused of running a $50 billion fraud. ADIA said it had invested $132 million three years ago in a fund that had partial investment in Madoff's Investment Securities, which could have suffered some losses, al-Ittihad newspaper reported. 'ADIA affirmed that is has not invested directly in Investment Securities," the Arabic-language daily reported.'"
read more: Reuters
The Abu Dhabi Investment Authority (Adia), the world’s largest sovereign wealth fund, may also have lost money in the US$50 billion (Dh183.6bn) ‘ponzi’ fraud scheme carried out by New York investment manager Bernard Madoff.
In 2005, Adia indirectly invested around $400m with Mr Madoff through a fund called Fairfield Sentry Ltd, according to a report in the New York Times on Saturday, which cited a description of Fairfield’s investors supplied to a prospective client. Adia has since withdrawn portions of its original investment from Fairfield Sentry twice, but may still have had some $132 million in the fund as of last year. Fairfield Sentry is part of Fairfield Greenwich Group, which is understood to have invested more than half of its assets under management with Mr Madoff’s investment company.
read more: The National
12/18/2008
Peugeot’s Michel Said to Be Picked by Sarkozy for Wealth Fund
Bloomberg reports that, "Gilles Michel, a member of the management committee of PSA Peugeot Citroen, was picked by French President Nicolas Sarkozy to head the country’s 20 billion-euro ($29 billion) sovereign wealth fund, three people with direct knowledge of the matter said.
Sarkozy chose Michel, 52, from two nominees put to him by the fund’s board, which may vote on the appointment tomorrow, said the people, who requested anonymity because the information isn’t public.
Sarkozy said on Nov. 20 that the government and the state- owned lender Caisse des Depots et Consignations will jointly raise 6 billion euros for the fund, which is being created to prevent the takeover of strategic French companies by foreign predators. The fund will also help companies to cope with the effects of the credit freeze."
read more: Bloomberg
12/17/2008
Norway - Government Pension Fund – Global seeks to block Warren Buffett on Constellation Deal
Reuters states, "Norway's sovereign wealth fund on Wednesday threw a spanner into U.S. investor Warren Buffett's deal to take over Constellation Energy, seeking to buy time to evaluate a rival bid by Electricite de France.
Norway's $339 billion oil fund said it filed a law suit in a Maryland court to delay a Dec. 23 Constellation shareholders' meeting due to vote on a takeover by MidAmerican Energy Company, a unit of Buffett's Berkshire Hathaway Inc.
'In our opinion, the MidAmerican agreement undervalues Constellation, and we expect the board to work for a solution that offers the highest value,' said Anne Kvam, head of corporate governance at the fund.
MidAmerican's $4.7 billion takeover in September was backed by Constellation's board. However in early December Electricite de France said it would pay $4.5 billion for half of Constellation's nuclear assets and give the U.S. company the option to sell it up to $2 billion more of its non-nuclear assets.
Norway's fund said it holds 4.8 percent in Constellation and likes to take an active role in the corporate governance of the companies in its portfolio. It is regarded as the world's most transparent sovereign wealth fund and is the second largest after the United Arab Emirates' fund."
read more: Reuters
12/15/2008
CBRE reports that SWFs expected to invest US$725 Billion in Commercial Real Estate Globally by 2015
The report states, "Sovereign Wealth Funds (SWFs) are expected to become one of the most significant investors in the world’s commercial property markets, potentially investing as much as US$725 billion over the next seven years, according to a new global report from CB Richard Ellis Group, Inc.
Although more than half of the SWFs are believed to already hold direct commercial real estate investments, allocations to the sector are expected to rise substantially. The potential impact on the global real estate market is significant.
Ray Torto, Chief Global Economist at CB Richard Ellis, explained: 'Given that the real estate sector’s investment characteristics – current income combined with long-term appreciation -- closely match SWF requirements, we expect them to increase their weighting of commercial property to approximately 7% of their total assets. With nearly US$4 trillion of total assets currently under SWF control, a 7% allocation would mean worldwide commercial real estate investments totaling US$280 billion. To put this number in context, the entire U.S. institutional-grade property portfolio owned or managed by investment managers and plan sponsors is valued at approximately US$330 billion1 today.'
Mr Torto continued: 'Looking to the longer term, the SWFs’ potential for future property investment is even more significant. It has been estimated that the SWFs could reach total assets of US$12 trillion2 by 2015. A 7% allocation implies SWFs would make approximately US$725 billion3 of net property investments over the next seven years.'
The influence of SWFs is expected to be felt across the world. In order to achieve target allocations, SWFs will need to diversify future investment widely across geographies, sectors and investment vehicles. Thus far, SWF property investments have been largely concentrated in the U.S. and the Middle East.
'Although SWFs are likely to continue to focus on core real estate product in major markets, they will have to put capital to work in new geographies and emerging sectors. Favored future destinations are expected to include Japan, the U.K. and other countries with currencies that are not held in the SWF’s foreign reserves,' said Michael Haddock, Director EMEA Research, CB Richard Ellis.
Mr Haddock continued: 'However, SWFs will have to look to both the indirect investment market and the debt market to fully meet their objectives in the real estate sector. It is also very possible that we will see outright acquisitions of property companies – listed and unlisted – as a way of assembling a significant direct real estate portfolio rapidly as well as acquiring the property management infrastructure to go with it.'"
read more: CBRE Press Release
12/12/2008
NZ Superannuation Fund: Exclusion of Companies involved in manufacture of Cluster Munitions or Nuclear Explosive Devices
The Guardians of New Zealand Superannuation today announced that they were excluding from the New Zealand Superannuation Fund companies associated with the manufacture of cluster munitions and the manufacture or testing of nuclear explosive devices.
The Fund will divest from stocks in six companies involved in the manufacture of cluster munitions, one of which is also involved in the simulated testing of nuclear explosive devices. The Fund will divest from another company involved in simulated testing. The Fund does not, and has never, held shares in any company that manufactures nuclear explosive devices. The total value of the Fund's shares in these companies is approximately $37 million, or 0.3 percent of the Fund's portfolio. The table at the end of this document provides the full list of companies involved.
"Today's announcement follows the New Zealand Government joining with 93 other nations in signing an international treaty banning the production or use of cluster munitions, and a comprehensive review of the nuclear weapons issue. We will continue to review our portfolio through our specialist screening agencies to ensure our list of excluded companies remains up-to-date," said Guardians Chief Executive Officer Adrian Orr.
read more: New Zealand Superannuation Fund
12/12/2008
Terengganu looks to the future with RM10 Billion fund
Terengganu is a sultanate and constitutive state of Malaysia. The New Straits Times reports that, "Terengganu is setting up a RM10 billion sovereign wealth fund to ensure its growth after its oil and gas resources are depleted. Called the Terengganu Investment Authority (TIA), the idea for the fund was mooted by Yang di-Pertuan Agong Tuanku Mizan Zainal Abidin and presented to the state and Federal Governments recently. Tuanku Mizan, who is the sultan of Terengganu, said the state must plan for its future economic growth. The king also said the state's wealth must be managed prudently and professionally so that its prosperity could be safeguarded. Yesterday, the state executive council endorsed the setting up of the TIA with Tuanku Mizan as chairman of the board of advisers. Other board members will be professionals. The TIA will operate as a sovereign wealth fund that invests and delivers long-term economic benefits and returns to its investors and Malaysia. It aims to initially raise up to RM10 billion that will be invested in Terengganu and the country. It will also have the mandate to invest globally and hopes to bring international partners to the state. The RM10 billion will be sourced from local and foreign capital markets with a proposal for the Federal Government to provide a government guarantee of up to RM5 billion and for the TIA to be declared a tax-exempt company. The funds will be secured against a portion of the state's oil revenues."
read more: New Straits Times
12/9/2008
Korea Investment Corporation Backs Merrill Lynch's CEO Thain After Loss
Bloomberg reports that, "Korea Investment Corp. said it still has faith in Merrill Lynch & Co. Chief Executive Officer John Thain after a stock rout that cut the value of its stake by $800 million and forced the firm's sale to Bank of America Corp.
'He was willing to change the company and Merrill needed a change,' Guan Ong, the $30 billion sovereign fund's chief investment officer, said yesterday in an interview in Seoul. 'We made the right decision because we believe in John Thain.'
Merrill's fifth-biggest shareholder joined Temasek Holdings Pte in endorsing Thain, who presided over 3,500 job cuts and engineered the firm's sale to Bank of America after replacing the ousted Stan O'Neal a year ago. The 53-year-old agreed to forgo a year-end bonus after the financial-market meltdown and bank bailouts stirred a public outcry over Wall Street pay."
read more: Bloomberg
12/8/2008
AMD, the Advanced Technology Investment Company and Mubadala Amend Transaction Agreements
"SUNNYVALE, Calif. -- December 8, 2008 --AMD (NYSE: AMD), the Advanced Technology Investment Company (ATIC) and Mubadala Development Company today announced amendments to the October 6, 2008 transaction agreements for the creation of a leading-edge semiconductor manufacturing joint venture, currently known as The Foundry Company. The transactions covered by the amended agreements are expected to close at the beginning of 2009.
The amendments to the terms between AMD and Mubadala provide for the following:
Mubadala will purchase 58 million shares of AMD’s common stock at a revised purchase price per share equal to the lower of (i) the average closing price per share of AMD’s common stock on the NYSE during the 20 trading days immediately prior to and including December 12, 2008 or (ii) the average closing price per share of AMD’s common stock on the NYSE during the 20 trading days immediately prior to the closing date of the transaction.
AMD will issue to Mubadala an additional 5 million warrants to purchase AMD stock, for a total of 35 million warrants.
The amendments to the terms between AMD and ATIC provide for the following:
The enterprise value of the manufacturing assets to be contributed by AMD to The Foundry Company will be reduced from a multiplier of 1.13x to 0.85x of the net book value of the assets. As a result, AMD will own approximately 34.2 percent and ATIC will own approximately 65.8 percent of “The Foundry Company’s” fully-converted common stock. AMD and ATIC will each have equal voting rights at the close of the transaction.
The net asset valuation multiple on future capital calls of The Foundry Company will be reduced from 1.1x to 0.9x.
All other material economic terms of the transaction agreements remain unchanged. ATIC will still invest $2.1 billion to purchase its stake in “The Foundry Company”, of which it will invest $1.4 billion directly in the new entity and will pay $700 million to AMD."
read more: AMD Corporate Site
12/8/2008
McLaren expect to lose a third of revenues
McLaren expect their revenues to fall by more than a third as a result of the global economic crisis, according to the Formula One team's boss and co-owner Ron Dennis. "Our budgets come from the advertising budgets of the companies that support us, and inevitably advertising budgets get slashed or, at least are significantly trimmed in times of economic strife," he told the Observer.
"We know we have to reduce our costs to cater for the inevitable downturn in income that is coming in 2010 and 2011," he added in an interview that the Sunday paper said took place before Honda announced on Friday that they were pulling out of the sport."We predict that our turnover will drop from 280 million pounds a year to as low as 175 million pounds a year," said Dennis. McLaren are 40 percent owned by Mercedes with 30 percent in the hands of Bahrain's state-owned Mumtalakat holding company and the remainder shared equally between Dennis and Saudi business partner Mansour Ojjeh.
read more: Reuters UK
12/6/2008
Kmg, Conocophillips, Mubadala Sign Agreement on Block N Shelf Project
Kazakh national oil and gas company KazMunayGas (KMG), ConocoPhillips and Energy & Industry Holding Co., a wholly owned subsidiary of UAE-based Mubadala Development Company, signed an agreement in Almaty on Friday on the principles of cooperation on the Block N shelf project.
The parties agreed that the project will be managed by a joint operating company, in which KMG will own 51% and the other two companies will own the remaining 49%. During the production period, KMG will be the sole owner of the operating company.
"In accordance with this agreement, KazMunayGas will transfer 24.5% stakes in the contract for the subsurface use to each ConocoPhillips and Mubadala," KMG President Kairgeldi Kabyldin told Interfax following the signing ceremony.
"This field has some 630 million tonnes of geological resources with recoverable resources estimated at about 270 million tonnes. Under the agreement, our foreign partners will pay a signing bonus of $100 million," he said.
read more: iStockAnalyst
12/5/2008
British Land revives sale of stake in flagship retail centre
FT reports that, "British Land has reignited talks to sell a large stake in its flagship £1.4bn ($2.3bn) Meadowhall shopping centre in the north of England. A London-listed property fund, backed by an Abu Dhabi sovereign wealth fund, is seen as frontrunner to secure the deal. The shopping centre in Sheffield, South Yorkshire, comprises almost a tenth of British Land's property portfolio. Meadowhall was valued at £1.4bn at the end of September according to the UK property company's most recent set of accounts, representing a net equivalent yield of 5.7 per cent. British Land is in talks to sell about half of the shopping centre to London & Stamford, a listed property opportunity fund launched at the start of the year by investors Raymond Mould and Patrick Vaughan.
London & Stamford has set up Cavendish, a joint venture with an unnamed Abu Dhabi sovereign wealth fund, to co-invest in sizeable transactions, and the majority of the equity would likely be sourced from the Middle East if a deal were to go ahead. There is competition from other interested buyers, however, with US opportunity fund Carlyle among several that are understood to have tabled offers should the deal not be taken forward with London & Stamford."
read more: FT
12/4/2008
CIC more skeptical on US Financial Firms
Reuters reports that, "China Investment Corporation, the sovereign wealth fund that has incurred steep paper losses on its stakes in U.S. financial firms, said on Wednesday it is "not brave enough" to invest in foreign financial firms and lacks confidence in the shifting U.S. financial regulatory situation.
'It's changing every week. How can I be confident?,' Lou Jiwei, chairman of CIC, said during the Clinton Global Initiative event in Hong Kong, referring to U.S. government efforts to rescue the devastated financial services sector. He said the fund continued to make investments overseas, and was looking to diversify geographically to include emerging economies. 'We are still actively making investments outside, and we will continue our investments,' he said during a panel discussion. Lou made his remarks just ahead of talks scheduled in Beijing between U.S. Treasury Secretary Henry Paulson and Chinese officials in the fifth round of a so-called strategic economic dialogue that Paulson initiated in 2006. Lou said the world should not look to China to resolve the financial crisis."
read more: Reuters
11/28/2008
Available Now - Special Report - Barclays seeks Sovereign Wealth
As giant financial institutions continue to seek new capital, many turn to sovereign wealth investors. Institutions like Morgan Stanley, UBS, and Citigroup have received capital injections early in 2008. This special report was written about Barclays Plc activities with sovereign investors in recent months leading to November 2008. The report examines certain relationships between the Bank and its investors as well as the background of the new offering. It also entails in detail the capital raising, investors, and other related material to the capital injection.
Purchase: Barclays seeks Sovereign Wealth
11/28/2008
France's Caisse des Dépôts - Creation of the Strategic Investment Fund (SIF)
"Paris, 20 November 2008 – The President of the French Republic announced this morning in Montrichard the creation of a Strategic Investment Fund (SIF), which is intended to boost the equity and to stabilise the capital of French businesses. He has decided to entrust the management of this fund to Caisse des Dépôts.
This mission is consistent with Caisse des Dépôts’ identity as a long-term investor that was affirmed in its Elan 2020 strategic plan and enshrined in the recent French law on modernisation of the economy. It accords with Caisse des Dépôts’ calling and experience as a well-informed and wise investor in the service of the public interest. It also extends the mission of management of the France Investment programme entrusted to Caisse des Dépôts via its subsidiary CDC Entreprises. It should be noted that Caisse des Dépôts contributes two-thirds of the total amount of this support programme for SMEs, with a commitment of €2.2 billion over six years.
The setting-up of the SIF is going to enable the commitment to businesses of the Caisse des Dépôts
Group to be boosted by allocating fresh resources to it. The SIF will be a French public limited company (société anonyme), a subsidiary of Caisse des Dépôts, and controlled by it, whose accounts will be consolidated with those of Caisse des Dépôts. It will be endowed, at the start, with 20 billion Euros contributed at par by Caisse des Dépôts from its equity (general section) and by the French State: 14 billion Euros in securities and 6 billion Euros in cash. It will not receive support from the Savings Funds managed separately by Caisse des Dépôts, the uses of which are fixed by law and are allocated in priority to the financing of social housing and urban policy.
The President of the French Republic set out this morning the fund’s guidelines. The fund will be investing in equity in order to promote the development of businesses, whether these are small or medium-sized enterprises. It will participate in the stabilisation of the capital of certain large French enterprises. It will act as a well-informed and wise investor in the service of the public interest, with a long-term horizon, and in accordance with tailored investment policies that will draw inspiration from those of the Caisse des Dépôts Group. Caisse des Dépôts’ Chief Executive Officer will be the Chairman of the SIF’s Board of Directors. The SIF will also be assisted by a policy committee, involving social partners, business leaders and economists in elaborating its main strategic aims. This committee will be chaired by Mr Jean-François Dehecq, the Chairman of Sanofi. The SIF’s investment committee will be chaired by Mrs Patricia Barbizet, the chief executive officer of Artemis. Like the other subsidiaries of Caisse des Dépôts, the SIF will be carrying on its activities under the oversight of the Supervisory Board. It will be submitting to it in particular its strategic policies and its annual management report.
Michel Bouvard, the Chairman of Supervisory Board of Caisse des Dépôts, and Augustin de Romanet, the Chief Executive Officer, are very pleased with the trust thus shown by the President of the French Republic in Caisse des Dépôts and its teams. They will take all the necessary steps for the SIF to be set
up immediately."
read more: Caisse des Dépôts
11/25/2008
Barclays Shareholders Back $10.5 Billion Share Sale mainly to funds from Qatar and Abu Dhabi
Bloomberg reports that, "Barclays Plc won shareholder support to raise 7 billion pounds ($10.5 billion) without surrendering control of its lending or dividends, Chairman Marcus Agius said. The bank, the second largest in the U.K., got more than 85 percent of shareholders to vote in favor of four resolutions calling for the sale of stock mainly to funds from Qatar and Abu Dhabi. Barclays, which is bypassing ordinary shareholders and the U.K.’s rescue plan as it complies with new capital requirements, rose 10 percent in London trading, the most since Oct. 14.
Barclays made the extremely difficult to avoid government restrictions on when it pays dividend, where it lends and the risks it takes, the company said today in a statement. 'We’re in the firing line,' said Agius, who is up for re-election in April and started today’s vote as investors were still shouting questions. Royal Bank of Scotland Group Plc and two other U.K. banks agreed to raise 37 billion pounds in the U.K. bailout. 'They have made it very clear that they think the government will lean on banks in which it has stakes for the interest of U.K. taxpayers,' said Simon Willis, a London-based analyst at NCB Stockbrokers Ltd. who has a reduce rating on Barclays. “That may well have a bearing on profitability.'"
read more: Bloomberg
11/25/2008
Occidental Petroleum Corporation and Mubadala Development Company sign EPSA to develop gas fields in Oman
Occidental Petroleum Corporation (Oxy) and Mubadala Development Company of Abu Dhabi (Mubadala) today announced the signing of an Exploration and Production Sharing Agreement ("EPSA") with the Ministry of Oil and Gas in the Sultanate of Oman. Under the terms of the EPSA the parties will develop four existing gas fields and explore for potential new discoveries in a newly formed contract area ("Habiba" - Block 62) in Northern Oman. The 20 year agreement covers a 2,269 square kilometre area.
Oxy will serve as operator under the EPSA and hold a 48-percent interest, with Mubadala Development Company holding a 32-percent interest and the Oman Oil Company holding the remaining 20 percent.
"We are pleased to expand upon our existing relationship with Oman and look forward to working with our partners to help ensure that future supplies of natural gas will be available to fuel Oman's economic growth," said Dr. Ray R. Irani, Chairman and Chief Executive Officer of Occidental. "Signing this EPSA is another important step in the implementation of our growth strategy within the region. The development of the substantial natural gas resources contained within the contract area will create significant value for the people of Oman and for our shareholders."
read more: Zawya
11/24/2008
Standard Chartered Plc May Lose Right to Print Hong Kong Money
Bloomberg reports that, "Standard Chartered Plc may lose its right to issue Hong Kong bank notes if a Singapore-owned company raises its stake in the lender above 20 percent through a rights offer, Hong Kong’s de facto central bank said.
'We don’t wish a foreign government to have a large influence over our note-issuing banks,' Joseph Yam, chief executive of the Hong Kong Monetary Authority, told reporters in Beijing today. His comments were broadcast on television.
Singapore’s Temasek Holdings Pte, the biggest shareholder in Standard Chartered, may raise its stake to as much as 22 percent from 19 percent as the company is acting as underwriter for part of the bank’s 1.8 billion pounds ($2.7 billion) rights offering. Lenders more than 20 percent owned by overseas governments are barred from issuing bank notes in Hong Kong.
This issue 'is currently in the realm of hypothesis and in any case, it will need the necessary regulatory approvals,' Standard Chartered’s London-based spokesman Arijit De said by phone today.
Yam also said that the rights offer was unlikely to result in a foreign government owning more than 20 percent of the bank. 'We are aware of and respect HKMA’s regulations,' Temasek said in an e-mailed statement, without elaboration.Standard Chartered, based in London, announced the offer today to bolster its finances."
read more: Bloomberg
11/23/2008
Qatar, Kuwait funds eye Warsaw exchange stake
Gulf Times reports that "Poland will probably sell shares of the Warsaw Stock Exchange directly to selected investors from the Middle East, scrapping earlier plans for an initial public offering as market turmoil continues. Poland, which holds 98.8% of the exchange, may sell a stake in a private deal next year, after investors including the Kuwait Investment Agency and Qatar Investment Authority expressed interest in “large’’ stakes, Maciej Wewior, a spokesman for the Treasury Ministry, said by phone yesterday. The ministry is waiting for a report from its advisers and may decide on the form of sale in the next couple of weeks, Wewior said, declining to specify the size of the stake to be sold or the timing of the transaction. Poland previously planned to sell 25% to 35% of the bourse in an IPO, and as much as 36% to institutional investors."
read more: Gulf Times
11/22/2008
GE in Talks With Four Asian Sovereign Wealth Funds
General Electric Co., down 61 percent this year in New York, is seeking funds from China Investment Corp., Government of Singapore Investment Corp. and at least two other sovereign-wealth funds. Talks are also being held with Temasek Holdings Pte of Singapore and China Safe Investments Ltd., Brussels-based spokeswoman Elma Peters said in a phone interview today. China Investment Corp. is the nation's $200 billion sovereign wealth fund.
Chief Executive Officer Jeffrey Immelt has lowered his 2008 profit target twice and last month he raised an additional $3 billion in the sale of preferred shares to investor Warren Buffett's Berkshire Hathaway Inc. Asian talks follow an $8 billion venture with Abu Dhabi's Mubadala Development Co. as GE taps infrastructure spending outside the U.S., where a recession is deepening. Getting partners to become shareholders has the added advantage of establishing a more stable investor base.
read more: Bloomberg
11/21/2008
Citigroup meets with key middle east investors
ADIA had $7.5 billion injected into Citigroup earlier this year. According to the NY Times, "in a bid to calm nerves, Citigroup officials are meeting with other large shareholders. Last week, Citigroup’s chairman, Winfried Bischoff, traveled to Dubai and met with Sheik Ahmed bin Zayed al-Nahyan, the director of the Abu Dhabi Investment Authority, according to two executives briefed on the situation."
read more: NY Times
CFIUS Reform: Final Regulations Issued on November 14, 2008
"The U.S. Treasury Department, on behalf of the Committee on Foreign Investment in the United States (CFIUS), issued final regulations governing CFIUS on November 14, 2008. The regulations implement Section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (Section 721). The regulations also codify improvements to the CFIUS process informed by seventeen years of practice. Issued in proposed form on April 21, 2008, the final regulations reflect CFIUS’s careful consideration of all comments received during the public comment period, as described in the discussion that precedes the regulatory text. By increasing clarity and transparency and ensuring that the CFIUS process is efficient, the regulations reinforce the United States’ longstanding commitment to open investment."
Regulations Clarify What Constitutes a Covered Transaction:
Only “covered transactions” are subject to CFIUS review under Section 721.
Covered transaction: Any transaction proposed or pending after August 23, 1988, by or with any foreign person, which could result in control of a U.S. business by a foreign person.
Greenfield investment: Greenfield, or start-up investment, is not covered.
Asset acquisition: Not a covered transaction if the assets acquired by a foreign person do not constitute a U.S. business.
Long-term lease: May be a covered transaction only if a foreign lessee makes substantially all business decisions concerning operation of a leased U.S. business, as if it were the owner.
Lending transaction: Not a covered transaction unless the foreign person acquires financial or governance rights characteristic of an equity investment, but not of a loan. Imminent default giving a foreign person actual control of collateral that constitutes a U.S. business is a covered transaction – but lenders in the ordinary course may qualify for an exception.
Incremental acquisition: After CFIUS concludes action on a covered transaction, the foreign person’s acquisition of additional interest in a U.S. business is not a new covered transaction.
CIC Resumes Talks to Buy Stake in Fortescue, Morning Post Says
China Investment Corp., the country's $200 billion sovereign wealth fund, has restarted talks to acquire a stake in Australia's Fortescue Metals Group Ltd., the South China Morning Post said, citing people it didn't identify.
CIC may bring in Baosteel Group Corp. and China Shenhua Energy Co. as partners to invest in the iron ore producer, the newspaper reported today. The sovereign wealth fund and Fortescue both declined to comment, while Baosteel and China Shenhua were unavailable for comment, the Morning Post said.
read more: Bloomberg
11/15/2008
For some SWFs Real Estate is still a good investment: Qatar's Sovereign Fund to Make More Real Estate Deals in 2009
According to Bloomberg, "Qatar Investment Authority, the country's $60 billion sovereign wealth fund, plans to make more real estate acquisitions in 2009 as global prices decline and investors sell assets.
'We are looking for prime properties in major cities at distressed prices,' said Navid Chamdia, the authority's head of real estate, in an interview at the Real Estate Investment World conference in Tokyo. 'We will continue to invest in attractive assets we are comfortable with.'
Real estate values are tumbling in New York, London and Tokyo as the global credit crisis has roiled lending and sidelined buyers. New York is poised to have its worst year since 2004 for commercial real estate transactions with deals plunging 61 percent so far. That's created opportunities for the Qatari fund to buy real estate more cheaply and to buy positions in real estate investment funds at a discount from investors and private equity funds, Chamdia said.
The Qatar Investment Authority has been investing in property in the past three years to diversify its holdings. The fund completed its first direct real estate investment in the U.S. in August, joining Boston Properties Inc. to buy the General Motors Building and three other New York towers for $3.95 billion. "
read more: Bloomberg
11/13/2008
Hedge fund firm GLG Partners said on Monday that it had been approached by a number of sovereign wealth funds
According to Reuters, "hedge fund firm GLG Partners said on Monday that it had been approached by a number of sovereign wealth funds or families interested in making an investment, as it reported lower net income and assets. Noam Gottesman, Chairman and co-Chief Executive, said on a call to analysts and journalists that the firm had been approached by 'a relatively good number of people', although he declined to give details of the approaches."
read more: Reuters
11/12/2008
ADIC & UBS plan new $1 billion infrastructure fund
According to Reuters, "a joint venture between Abu Dhabi Investment Company (ADIC) and UBS Global Asset Management plans new funds of up to $1 billion and will invest over $200 million in two Gulf infrastructure projects. The venture's CEO Mark Thompson said on Monday the ADIC-UBS venture will continue to invest in equity in the Middle East-North Africa (Mena) region despite the slowdown in projects due to the liquidity crunch."
read more: Reuters
11/10/2008
Dubai World eyes Russia investments despite crisis
Reuters reports that, "state-owned investor Dubai World, which is building the world's tallest tower, is looking at port, logistics and urban development investments in Russia and is not slowing any of its projects due to the global financial crisis, a senior official said on Monday.
'We are continuing with our projects without stopping or slowing down internationally or regionally,' Dubai World Secretary-General Farid Ahmed told reporters, adding the firm was not reconsidering the $40 million tower development. Ahmed said Dubai World had no problems funding its projects, but declined to elaborate on how the company would raise financing in the future given tighter global credit markets."
read more: Reuters
11/9/2008
US Must Work Closely with G20, Says Dubai Group
The United States will have to work closely with the G20 to help steer the world out of the financial crisis and to overhaul the international financial system, Soud Ba’alawy, executive chairman of Dubai Group, said on Saturday. “I think the American administration will have to work closely with the G20. America is still the super power, it represents 45 per cent of the world economy and what goes on in America has impact on the whole world. They will have to work to resolve this situation,” Ba’alawy told a Press briefing at the World Economic Forum’s inaugural Summit on the Global Agenda in Dubai. The G20, an informal grouping of the world’s top developed and developing economies, will hold a summit next week in Washington.
Ba’alawy said the crisis has shaken the world’s confidence on the global financial system. “My view is that today we are facing a situation where every belief that we had in the past 30 years has to be questioned. The system itself needs to be overhauled.” However, he said the global financial crisis has also thrown up some opportunities. “I think this is a big opportunity for the emerging markets. If emerging markets take this crisis seriously this is a great opportunity for emerging market countries and companies.” He said sovereign wealth funds should also take advantage of the situation. “Protectionism is natural,” Ba’alawy said. “Nothing will change. But there will be times like this when sovereign wealth funds will be welcomed big time.”
The World Economic Forum, in partnership with the Government of Dubai, opened the inaugural Summit on the Global Agenda in Dubai on Friday. The Summit is a unique and timely gathering of the world’s 700 most innovative and relevant minds — leaders from academia, business, government and civil society from around the world. Organised by the Forum’s Network of Global Agenda Councils, the Summit provides a platform to share ideas and collaboratively address some of the key issues on the global agenda — with the aim of laying out solutions to some of the most pressing issues. Mohamed A. El Erian, Managing Director of Pacific Investment Management Company, better known as PIMCO, said; “The election of Senator (Barack) Obama provides a unique opportunity for leadership both domestically and internationally. You need change and you have a very critical agent of change in the President Elect.”
read more: Khaleej Times
11/8/2008
RBS to court SWFs as possible investors
The Telegraph reports that "Stephen Hester, the new chief executive of Royal Bank of Scotland, is to court sovereign wealth funds about buying shares in the stricken lender as part of its £20bn capital-raising. Mr. Hester will meet representatives of a number of investment funds backed by foreign governments even as RBS prepares for the Treasury to become the bank's biggest, and possibly majority, shareholder. The meetings will take place as part of a roadshow for the fundraising, during which Mr. Hester will hold talks existing and potential new investors.
'We are going to be talking to anyone with money and they [the sovereign funds] have a lot of money,' said a person familiar with Mr. Hester's plans.
It was unclear last night which investment bodies he would meet, but people close to RBS dismissed any parallel between his prospective conversations and the investments made last month by Abu Dhabi-based and Qatari investors in Barclays. Mr. Hester declined to comment on talks with potential shareholders."
read more: The Telegraph
11/7/2008
Mubadala-GE fund eyes global market
Reports say that, "a joint venture fund launched by Mubadala and General Electric (GE) will be up and running within a year with a credit line of $50 billion (Dh183.5bn). Abu Dhabi Government-owned Mubadala and US-based GE signed an agreement to establish the 50-50 fund in New York last July. 'Basically the deal is that GE and Mubadala will each invest $4bn in a fund with up to $50bn of borrowing capability to invest in infrastructure projects around the world,' said GE Middle East and Africa General Manager Isam Moursy.
'It is not really restricted to the UAE or Middle East.'
He said Mubadala and GE, a multinational technology and services conglomerate that has been in the UAE since 1974, were currently obtaining certification to allow the fund to operate in the region."
read more: Emirates Business
11/6/2008
China Investment Corporation recruiting in gloomy London, New York
AFP reports that, "spotting an opening in the global fight for talent, China's ambitious financial institutions are planning recruiting trips to London and Wall Street on the wounded financial titans' home turf. Sovereign fund China Investment Corporation has begun a global search, multi-billion dollar Chinese-French fund Fortune SGAM plans interviews on Wall Street and Shanghai's government is headed to London and New York next month with job offers in hand. 'There are layoffs on Wall Street since the crisis but China's financial industry is still in its infancy and is hungry for talent,' Pei Changjiang, chief executive of the Fortune SGAM Fund, told AFP."
read more: AFP
11/5/2008
Temasek Holdings to Sell Indian Funds Management Unit
Bloomberg reports that, "Temasek Holdings Pte, Singapore's state-owned investment company, will sell its Indian mutual fund venture to Religare Enterprises Ltd. Lotus India Asset Management Co., a joint venture between Temasek's unit Fullerton Fund Management Group, and Sabre Capital Worldwide Inc., had assets under management of 54.58 billion rupees ($1.13 billion) as of October, according to data compiled by Bloomberg."
read more: Bloomberg
11/4/2008
Dubai World-MGM Mirage investment gets initial OK
Nevada gambling regulators have given preliminary approval for Dubai World to invest more than $6 billion in casino giant MGM Mirage Inc. The state Gaming Control Board gave its OK on Wednesday for several subsidiaries of the investment arm of the Persian Gulf state to proceed to Nevada Gaming Commission consideration later this month. Dubai World controls 9.4 percent of MGM Mirage's stock and owns 50 percent of the under-construction $9.1 billion CityCenter development on the Las Vegas Strip. Dubai World and MGM Mirage will have to be licensed for CityCenter sometime next year.
read more: International Herald Tribune
11/4/2008
Low Prices bad for Iran Oil Fund
Zawya reports that, "Iran's central bank warned on Monday that if oil prices fall under 60 dollars a barrel, the country's oil-dependent economy will struggle to survive the world financial crisis, the ISNA news agency reported. "If average price of oil stays at 60.6 dollars in the remaining five months of the current year (to March 2009), we can get through this crisis safe and sound," the bank's deputy for economic affairs, Ramin Pashaifam, was quoted as saying. Pashaifam said that with a minimum price of 60 dollars, Iran will still need to use savings from oil revenues to cover its budget needs. "In a case of 60 dollars per barrel for oil, no cash will remain in the Oil Stabilisation Fund," he said, referring to a fund which aims to guard against price fluctuations and to finance private sector projects."
read more: Zawya
11/4/2008
SOFAZ Executive Director takes part at the EITI Board meeting
Baku. Rashad Suleymanov, Chairman of the National EITI Committee, a member of the EITI Board and the Executive Director of the State Oil Fund of the Republic of Azerbaijan Shahmar Movsumov participated at the EITI Board meeting which was held on 29-30 October, 2008 in Athena.
Importance of EITI Resolution adopted by UN General Assembly was emphasized at the meeting and Azerbaijan’s initiative in submission of this Resolution to the UN General Assembly was appreciated.
It was also emphasized that Azerbaijan is the first country which officially launched the Validation process and it was praised by other Board members.
Preparation works for the International Conference which will be held on 16-18 February, 2009 in Doha were discussed at the meeting.
read more: APA-ECONOMICS
11/2/2008
Future Fund 'cannot bail out' mortgage funds
News Limited reports that, "Future Fund chairman David Murray says it is not the role of the $63 billion fund to bail out troubled mortgage-based investment funds. Some mortgage-based investment funds have had to be frozen after they experienced an exodus of funds, following the federal government's guarantee of bank deposits. Market-linked funds are not covered by the guarantee. Last week, Prime Minister Kevin Rudd said that larger and more liquid institutions - including the major banks - could provide liquidity to various market-linked investment vehicles within the financial system by buying their securities. The federal government had asked Mr Murray to assist Treasury in its talks with relevant financial institutions on the matter.
Asked if a sovereign wealth fund such as the Future Fund would invest in the mortgage funds to help them through the crisis, Mr Murray told Sky News' Sunday Business program that the Future Fund operated on commercial principles, not political principles."
read more: News Limited
11/2/2008
British Prime Minister Gordon Brown briefly talks about Sovereign Wealth Funds
The National reports, "the growth of Sovereign Wealth Funds (SWFs) is one of the most notable characteristics of the current wave of globalisation. The UK government welcomes the positive role that SWFs such as those in the UAE and Qatar have in the efficient allocation of capital and the benefit that they bring to the global economy by taking a long-term view of their investment decisions. To ensure a transparent environment that supports SWF investment, we have fully endorsed the lead taken by the IMF to develop a common set of principles. And, of course, the UK, with its history of open investment, will continue to be a natural place for SWFs to invest."
read more: The National
10/31/2008
Alleged Rumor: Social Media Network, Facebook might seek Dubai SWF Funding
According to Tech Crunch, "sources have told us that Facebook CFO Gideon Yu was in Dubai this week, possibly meeting with Dubai International Capital, exploring fundraising options. U.S. investors, including VCs and hedge funds, aren’t interested or aren’t able to invest at the valuation Facebook expects. That leaves Sovereign Wealth Funds as the only viable funding solution. And the window to get money from them may fast be closing, too."
read more: Tech Crunch
10/30/2008
Libyan funds talk to Telecom Italia and others on stakes
Reuters reports that, "Libyan funds are in talks to buy stakes in Telecom Italia and other Italian companies, the son of Libyan leader Muammar Gaddafi said on Thursday, spurring the telecoms company's shares. Libyan funds have just raised their stake in Italy's second-biggest bank, UniCredit, to 4.9 percent, becoming the number two shareholder in the bank, which is asking investors to help boost capital by 6.6 billion euros. Libya has also bought shares in oil company Eni."
read more: Reuters
10/29/2008
Temasek to invest up to $147 million in Pakistan NIB Bank
Singapore sovereign wealth fund Temasek Holdings has agreed to a further investment of up to 12 billion rupees (94 million pounds) in Pakistan's NIB Bank via a rights issue, NIB said.
Temasek, already NIB's largest shareholder with 63.15 percent, will participate in the Pakistani bank's 12 billion rupee rights issue and subscribe for shares not taken up by minority holders.
The rights issue will be offered to all existing shareholders at a ratio of 42.198 shares at par value, which is 10 rupees per share, for every 100 shares held as of November 19.
read more: Reuters UK
10/29/2008
Falling oil prices could slow down MENA Sovereign Wealth Fund Growth
As oil prices begin to buckle under the current market, it could slow down the cash inflows to oil-based sovereign wealth funds. According to The National, "Abu Dhabi National Oil Company (Adnoc) today told customers it will cut crude oil deliveries from several major oilfields as the UAE moved to comply with a reduced OPEC oil-production ceiling.
'There is some way to go for oil before it has an impact on the economy,' Hareb al Darmaki, the executive director of the Abu Dhabi Investment Authority, a sovereign wealth fund, told the same meeting."
read more: The National
10/28/2008
US Treasury - Kimmitt woos Gulf Sovereign Wealth Fund investors to ease turmoil
The AFP reports that, "US Deputy Treasury Secretary Robert Kimmitt called on oil-rich Gulf Arab countries on Tuesday to continue investing in the United States to help restore financial stability.
'We're looking for sovereign wealth funds (SWFs) to continue their over five-decade track record of investing on sound commercial bases,' Kimmitt said during a visit to the United Arab Emirates, his second stop on a five-nation tour of Gulf countries and Iraq.
'If they do that both in the US and elsewhere, I think this is how they can best contribute to the global economy,' he said. Kimmitt, who came to the UAE from Saudi Arabia, said he was meeting with both government officials and investors in the region."
read more: AFP
10/28/2008
Italy set to curb sovereign wealth funds
According to FT.com, "Italy’s centre-right government opposes sovereign wealth funds buying more than 5 per cent of individual Italian companies, Franco Frattini, foreign minister, said on Monday. Rome has set up a national interests committee to establish rules about the funds’ behaviour. A 5 per cent stake ceiling would make Italy one of the more restrictive markets for sovereign wealth funds among its European competitors."
read more: Financial Times
10/26/2008
Qatar Investment Authority comes to Barclays' aid again
The Guardian reports that, "Barclays is set to unveil a £2bn-plus rescue package that will see the Qatar Investment Authority boost its investment in the British bank where it already owns an 8 per cent stake. A deal that could be announced in days will see the Qataris subscribe to £1bn worth of new loan stock with another £1bn being taken up by Barclays' existing institutional investors. The special new shares will be high-yielding securities that will pay a relatively high rate of interest. The funds will allow Barclays to say that it is on track to meet new government requirements that force banks to raise additional cash to meet tighter capital adequacy ratios in the wake of the credit crunch."
read more: The Guardian
10/26/2008
China's CIC chief defends investments, Blackstone
According to Reuters, "The chairman of China's sovereign wealth fund has defended its operations, saying its investment in U.S. private equity firm Blackstone will pay off in the long run, and noted it holds over 90 percent of its assets in cash just as global equity markets are plummeting. China Investment Corp (CIC) bought its original stake in Blackstone Group just before the company's $31-a-share initial public offering in June 2007, but has seen the value of its investment sink as a year-long crisis froze credit markets, prompting widespread criticism.
Blackstone's shares ended Friday trade at $7.89."
read more: Reuters
10/24/2008
OECD Declaration on Sovereign Wealth Funds and Recipient Country Policies
The guidance has three parts:
OECD Ministerial Declaration on Sovereign Wealth Funds and recipient country policies.
Guidance that reaffirms the relevance for Sovereign Wealth Funds of long standing OECD investment principles which were first adopted in 1961 for recipient country policies.
Guidance for investment policies relating to national security. OECD investment instruments the right and the duty of governments to countries to take measure to safeguard essential security interests. This newer guidance, developed over the last year, provides recommendations for recipient country policies that help to make these policies both effective in protecting the safety of and to ensure that they are not used as disguised protectionism.
Cabinet to expand National Development Fund to stabilize economy
The Cabinet decided Thursday to expand the size of the National Development Fund from NT$200 billion (US$6.01 billion) to NT$1 trillion to increase government investment in local businesses, in a bid to stabilize the country's economic situation. Chen Tain-jy, chairman of the Council for Economic Planning and Development, said after a Cabinet meeting that the decision was made in light of the serious impact of the global financial crisis on Taiwan's economy. Chen said the Cabinet is planning to obtain the additional NT$800 billion through a loan from the state-owned Chunghwa Post Co. and invest the fund in the manufacturing and service sectors to provide momentum to the economy.
According to Bloomberg, "President Nicolas Sarkozy said France will create a sovereign wealth fund to massively aid national businesses after the global stock market rout left some companies in need of capital and at risk of takeover. The government will also put a tax on business investment on hold until the start of 2010 to bolster French companies being battered by the global economic slowdown and the likelihood of a recession in France, he said. The government will ask state-owned reinsurance company CCR to insure more credits and loans that private insurers are avoiding, he said. The state will 'massively intervene each time a strategic company, even of small or medium size, needs shareholder equity,' Sarkozy said of the new fund today at a roundtable in Annecy, France. He called the vehicle a public intervention fund. Sarkozy is pressing ahead with efforts to defend companies, measures that have received lukewarm response from his European partners. He has also helped organize an emergency summit with heads of the world's biggest economies in Washington for Nov. 15, where he will push to overhaul rules that govern world financial markets, a position being resisted by the U.S.
The French fund will be managed by state-controlled lender Caisse des Depots et Consignations and will raise funds in the market for its investments, Sarkozy said. The fund will seek to earn capital gains from taking temporary stakes in companies, he said. Europe 'mustn't be naive, mustn't leave its companies at the mercy of all predators, mustn't be the only one not to defend its interest, not to protect its citizens,' he said at a second appearance in Argonay in the French Alps. France's benchmark CAC 40 stock index has shed 43 percent this year as the global credit crisis chocked bank lending and left companies struggling to find financing. Slowing growth is also dimming the outlook for shares with the Bank of France saying that Europe's third-biggest economy likely fell into its first recession in almost 15 years in the third quarter. Business confidence in October slipped to the lowest since 1993, a report showed today."
In this report, "Turkmenistan will establish the Stabilization Fund to avoid the negative impact of the world economic and financial crisis on the national economy. This was announced by Turkmen President Gurbanguly Berdimuhamedov at a government meeting on 21 October, the Turkmenistan.ru correspondent reports from Ashgabat. According to the head of state, the Stabilization Fund will make it possible to minimize the dependence of the national economy on the oil and gas sector and also protect it from a negative impact of external factors. The fund will cluster the remaining surplus of the state budget and will be used to accumulate the financial assets of the state. The fund's resources will be channeled into the social-economic development of Turkmenistan and the implementation of various budget programmes, introduction of modern technologies and state of the art equipment. "Some part of the Stabilization Fund, namely the so called "funds of future generations" will be invested in low risk, long-term financial shares and real estate. This will be Turkmenistan's insurance fund for our children," Gurbanguly Berdimuhamedov said."
Norway's oil fund to put $2 billion towards Indian stocks
According to Reuters, "Norway's sovereign wealth fund plans to invest $2 billion in Indian stocks over the next three months, a Norwegian embassy official said on Wednesday. 'The deputy secretary general at the finance ministry (of Norway) said that sovereign wealth fund is going to invest $2 billion in Indian stocks,' Lasse Johannessen, minister counselor at the Norway embassy in Indian capital, told Reuters. 'This money is going to be invested from now until Jan 2009,' he said, citing the Norwegian finance ministry official. Johannessen said the fund would increase India's weighting to 0.94 percent from 0.2 percent in its overall portfolio."
A former top executive at hedge fund Tahoma Capital has been named chief investment officer of The Alaska Permanent Fund. Jeffrey Scott will join the Juneau-based semi-public fund next month. Scott served as CEO and CIO of Bellevue, Wash.-based Tahoma from 2005 until 2007, before founding his own financial management and consulting business, JCS Advisors. Prior to joining Tahoma, Scott managed a $60 billion absolute return portfolio for software giant Microsoft Corp. “Jeff has experience with the asset classes in our portfolio, but his experience has been managing to a different time horizon,” APFC CEO Michael Burns said. “We’re excited that Jeff will bring a different perspective to the permanent fund.”
Hong Kong Monetary Authority to offer HK$4 billion in Exchange Fund paper
The Hong Kong Monetary Authority said on Monday it would issue an extra HK$4 billion (US$515 million) in Exchange Fund paper in two batches to meet demand for liquidity from banks. To maintain existing liquidity in the banking system the HKMA said it would buy U.S. dollars against Hong Kong dollars to increase the Aggregate Balance by about HK$3.996 billion to HK$14.079 million on Wednesday. The global credit crisis had boosted banks' demand for Exchange Fund paper in recent weeks, the HKMA, Hong Kong's central bank, said. The first batch of Exchange Fund bills, totalling HK$2 billion, would be issued on Oct. 28 and the second batch of HK$2 billion would be issued on Nov. 4, the HKMA said.
Prudential negotiating with high-profile backers in attempt to bankroll AIG assets bid
Prudential is negotiating with high-profile backers who would bankroll the company's multi-billion pound bid to buy certain Asian assets of failed American insurer AIG. It has hired City bank Credit Suisse to conduct talks with cash rich sovereign wealth funds in China and the Middle East, with the Qatar Investment Authority being touted as a potential investor ready to take a stake of up to 20 per cent in the Pru for £1.2billion. The company declined to comment. However, boss Mark Tucker has made no secret of his interest in AIG's operations in countries such as Japan, India, Singapore and China.
China Currency Reserves Rise to Record $1.9 Trillion
According to Bloomberg, "China's foreign-exchange reserves rose to a world record $1.906 trillion, helping to strengthen the nation's finances as the credit crisis threatens to trigger a global economic slump. Currency holdings rose 32.9 percent at the end of September from a year earlier, the People's Bank of China said on its Web site today. The increase of about $97 billion over the quarter was down from a $126.6 billion gain in the previous three months. China has cut interest rates twice in the past month to stimulate growth as the worst financial crisis since the Great Depression dims the outlook for exports. The world's fourth- biggest economy can still expand 10 percent this year and 9 percent in 2009, central bank Deputy Governor Yi Gang said Oct. 11 in Washington."
The Wall Street Fallout Edition includes some of the following areas:
Activity Snapshots
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SWFs and Real Estate
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Fund Primer
Sovereign Wealth Directory
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10/13/2008
IWG-SWF releases GAPP 'Santiago Principles'
In furtherance of the "Objective and Purpose", the IWG members either have implemented or intend to implement the following principles and practices, on a voluntary basis, each of which is subject to home country laws, regulations, requirements and obligations. This paragraph is an integral part of the GAPP.
GAPP 1. Principle
The legal framework for the SWF should be sound and support its effective operation and the achievement of its stated objective(s). GAPP 1.1 Subprinciple The legal framework for the SWF should ensure the legal soundness of the SWF and its transactions. GAPP 1.2 Subprinciple The key features of the SWF's legal basis and structure, as well as the legal relationship between the SWF and the other state bodies, should be publicly disclosed.
GAPP 2. Principle
The policy purpose of the SWF should be clearly defined and publicly disclosed.
GAPP 3. Principle
Where the SWF's activities have significant direct domestic macroeconomic implications, those activities should be closely coordinated with the domestic fiscal and monetary authorities, so as to ensure consistency with the overall macroeconomic policies.
Regulators continue to monitor sovereign investments in the United States
According to the Financial Week, "Although the market troubles have put a drag on corporate dealmaking, don’t expect federal authorities to slow down in their pursuit of bribery cases— especially if banks continue to seek infusions of cash from sovereign wealth funds.
'We've seen the high-water mark for [Foreign Corrupt Practices Act] cases,' said Steven Tyrrell, chief of the Justice Department's fraud section, speaking at a Securities Industry and Financial Markets Association conference today. '[But] I believe we have yet to reach the crest of the wave.'
While the current credit crisis, and the lawsuits and prosecutions related to it, may produce a crop of additional FCPA cases, Mr. Tyrrell noted the recent boom of sovereign wealth funds is an area at the top of the Justice Department's hit list, though it has not yet garnered any definitive cases. Mr. Tyrrell told Financial Week after his remarks that the DOJ was looking at both passive and active investments by U.S. securities firms into sovereign funds, and vice versa. But he would not comment on any particular investigations. He did tell conference attendees, however, that firms should conduct due diligence on key personnel at sovereign funds and find out ultimately who manages the fund: private asset managers or government officials."
Russia to use oil wealth fund for bank loans says Finance Minister Kudrin
According to Reuters, "Russia will use one of its oil wealth funds to fund 450 billion roubles ($17.19 billion) of the 950 billion rouble subordinate loans package for banks, Finance Minister Alexei Kudrin said on Tuesday. The 450 billion 'will come from one of the funds which we have,' Kudrin said. Russia's two oil wealth funds totaled $189.7 billion on Oct. 1."
Government of Singapore Investment Corporation heeded warning of US credit crisis
According to Reuters, "When Tony Tan, executive director of Singapore's biggest sovereign wealth fund, warned in July the world might plunge into its worst recession in 30 years, many shrugged off his remarks as too gloomy. Three months later, Tan's prophecy of doom is becoming a reality as the credit crisis ravages U.S. and European banks and takes a growing toll on the global economy. Tan's Government of Singapore Investment Corp (GIC) is meanwhile sitting with 7 percent of its estimated $300 billion portfolio in cash and another 26 percent in G7 government bonds. Tan, a 68-year old former finance minister, professor and banker, and his team are now cautiously sifting through the financial carnage to shop for distressed assets in the United States in an effort to boost long-term returns for Singapore's central bank."
China Investment Corporation under review for transparency
The new website of the China Investment Corporation has prompted the Sovereign Wealth Fund Institute to review the CIC transparency rating. For the past two consecutive quarters, the CIC has had a minimal rating and was downgraded to a 1 for the 2nd quarter. As the new quarter is here, the CIC is up for another transparency assessment.
Although the LMTI ratings for all the funds will be reviewed and released in the upcoming 3rd quarter of the SWQ and here on the official Sovereign Wealth Fund Institute website, the revised score for the CIC will be released on the CIC profile page soon. For now, we can say that the new site reveals a lot more about the fund and their objectives then its predecessor.
9/26/2008
Kor sells stake to Mubadala
Kor Hotel Group, which operates about a dozen hotels worldwide, has sold a 50 percent stake to the investment arm of Abu Dhabi government to speed the company's expansion into foreign markets.
The hotel group, a unit of Los Angeles-based Kor Group, sold a 50 percent stake in itself to the Mubadala Development Co. The strategic partnership plans to focus on taking the company's Viceroy and Tides brand s into Europe, Asia and the Middle East.
Kor plans to focus on managing either Mubadala-owned properties or acting as a manager for properties not owned by Mubadala. It does not plan to build or own the hotels.
Four properties in the Middle East are currently under development, including hotels in Abu Dhabi, Dubai and Oman. Kor is also setting up regional headquarters in Abu Dhabi.
Mumtalakat Holdings posts around $650 million profit
Net income BD245.8 million
Total consolidated revenues BD1.8 billion
Total assets BD5.3 billion
Shareholders' equity BD3 billion
According to the press release, "Bahrain Mumtalakat Holding Company B.S.C (c), the investment company for Bahrain, announced today its inaugural set of financial results for the period 29 June 2006 to 31 December 2007. Having been created in June 2006 to be an independent holding company for the Government of Bahrain's non-oil and gas assets, Mumtalakat now has a total of 35 commercial enterprises within its $14 billion portfolio. Its investment strategy is to enter into partnerships with local and international institutions targeting opportunities for long-term, sustainable financial returns."
The China Investment Corporation, a $200 billion sovereign wealth fund based in Beijing, is launching a recruiting effort to help build up internal expertise. Most SWFs have 45-50% of their assets externally managed.
Persian Gulf Shares Rebound on Fed's Bailout Plan; Emaar Climbs
Persian Gulf shares advanced as the U.S. government announced a plan to buy $700 billion in bad mortgage investments from financial companies and after global markets rallied late last week.
Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, had its biggest gain since listing in March 2000, data compiled by Bloomberg show. National Bank of Abu Dhabi PJSC rose the most in almost eight months and Zain gained after raising $4.49 billion through a capital increase.
The Kuwait Investment Authority may inject as much as 1 billion dinars ($3.75 billion) into Kuwait's stock market to alleviate recent declines, Asharq al-Awsat reported today, citing unidentified officials. The Kuwaiti government last week urged the KIA, the country's $250 billion sovereign wealth fund, to infuse 300 million dinars into Kuwait's stock market, which has seen shares lose 12 billion dinars in value so far this month, the newspaper said.
Wall Street: Where have all the Sovereign Wealth Funds Gone?
Turbocharged with extra oil cash in the first half of 2008 before the sharp 1/3 rd correction from $147 per barrel since, SWFs would have been flush again to respond to ever weakening bank equity prices. But SWFs haven't been biting. Like nearly everyone else, the credit crunch drama has turned out to be both more prolonged and severe than had previously expected, with no guarantee the worst is over, going by recent LIBOR spread widening. A banking system that now looks far too big and needs to shrink balance sheets, raising questions over solvency not just liquidity, doesn't warrant fresh capital infusions from SWF in the hope of a quick turnaround in market prices. The falling oil price has prompted further caution, though most sovereigns are still building reserves while the price remains above $50 per barrel.
This CFTC report confirms the presence of sovereign investment vehicles participating in the commodities market.
According to the CFTC, four entities were identified as sovereign wealth funds:
2 separate pension funds run by a European government
1 fund in the name of a North American government
1 fund in the name of a European city
For single-commodity clients of swap dealers 6 entities that appear to be sovereign wealth funds were identified as above the threshold levels described earlier (i.e., total all-months gross futures equivalent position of 25 percent or more of a single-month limit or level).
Norway oil fund exits Rio Tinto on ethical grounds
Norway on Tuesday excluded iron ore miner Rio Tinto from its $375 billion (212.8 billion pounds) sovereign wealth fund due to environmental concerns over its activities in Indonesia, as part of its drive for ethical investment.
Norway's Government Pension Fund -- Global, familiarly known as the "oil fund", invests under ethical guidelines set by the government. In the past it has excluded companies producing nuclear arms or cluster munitions and ones deemed to have caused environmental damage or abused workers' or other human rights.
The fund invests Norway's oil and gas wealth in foreign stocks and bonds, is Europe's biggest equity investor and holds on average over 1 percent of European listed shares.
Preview article for the next Sovereign Wealth Quarterly - October Release Q3 Y2008 Some SWFs are looking opportunistically at discounted residential properties in the West.
Bulk purchases on distressed residential properties are coming into focus for many sovereign wealth funds and other institutional investors. Some SWFs who invest in real estate stick with core real estate investments like hotels, offices, and apartments. Even some Saudi investors are looking opportunistically in acquiring agricultural real estate to stem rising food costs. These types of investments have yielded acceptable IRRs for many of the funds. Another advantage is that real estate investments are not as politically sensitive as acquiring stakes in foreign brand name corporations.
Now, a number of SWFs are looking opportunistically at discounted residential properties in the West. The United States, the UK, and Australia have been ideal candidates for sovereign wealth distressed real estate investment, in the sense that these markets are developed and REO assets are at significant discounts from their original prices. Property rights, liquidity, and ease of foreign investment requirements in real estate have also made the West an attractive opportunity. Numerous financial institutions want these assets off their balance sheets. Many sovereign investors and hedge funds are viewing these REO portfolios from 50 cents to 70 cents on the dollar.
According to RealtyTrac, an online marketplace for foreclosure properties released its Q2 2008 U.S. Foreclosure Market Report. The report shows, "foreclosure filings were reported on 739,714 U.S. properties during the second quarter, a nearly 14% increase from the previous quarter and a 121% increase from the second quarter of 2007. The report also shows that one in every 171 U.S. households received a foreclosure filing during the quarter."
Source: RealtyTrac
The views in this publication are expressed by Michael Maduell.
Michael Maduell is the Founder and President of the Sovereign Wealth Fund Institute.
9/8/2008
Italy wants study of EU sovereign fund - minister
Italy will propose that the European Union consider changing the European Investment Bank (EIB) into a sovereign investment fund for the 27-nation bloc, Economy Minister Giulio Tremonti said on Sunday.
Tremonti said such a fund could make major investments and could be one way for Europe to overcome its economic crisis. The fund could be similar to Italy's Cassa Depositi e Presiti, a state investment company that has counterparts in several European countries.
"The proposal is to turn the EIB into the European Cassa Depositi e Prestiti, that would become the sovereign fund on the European level but that could function on the local level as well," Tremonti told reporters on the margins of an economic conference.
Federal Reserve limits ICBC Loans to China Fund-Owned Companies
According to Bloomberg, "The Federal Reserve told China's sovereign wealth fund it cannot subsidize loans for its companies through the New York branch being opened by government-controlled Industrial & Commercial Bank of China Ltd.
Companies controlled by China Investment Corp. may borrow only on "market terms" from the branch of government-owned ICBC, according to a letter released today by the Fed in Washington and dated Aug. 5. Transactions with such companies are limited to 20 percent of the branch's lending base, the Fed said."
International Working Group of Sovereign Wealth Funds Reaches a Preliminary Agreement on Draft Set Generally Accepted Principles and Practices-"Santiago Principles"
The members of the International Working Group of Sovereign Wealth Funds (IWG), which met on September 1-2, 2008 in Santiago, Chile, reached today a preliminary agreement on a draft set of principles and practices for recommendation to their respective governments.
The Generally Accepted Principles and Practices for Sovereign Wealth Funds (GAPP) is a voluntary framework that would guide the appropriate governance and accountability arrangements, as well as the conduct of appropriate investment practices by SWFs. In response to the call from the International Monetary Fund's policy-guiding International Monetary and Financial Committee (IMFC), the IWG expects to present the GAPP to the IMFC at its October 11 meeting in Washington DC. The IWG intends to publish the GAPP thereafter.
The IWG members also decided to explore the establishment of a standing group of sovereign wealth funds (SWFs). This is in recognition of the need to carry forward the work relating to the GAPP, as necessary, and to facilitate dialogue with official institutions and recipient countries on developments that impact SWF operations.
IMF urges transparency as wealth fund meeting stormed
A top IMF official on Wednesday urged transparency from cash-rich global sovereign wealth funds, as protesters stormed a meeting of the world's largest state-run pension funds in the Chilean capital.
International Monetary Fund First Deputy Managing Director John Lipksy said best practice guidelines agreed on by the world's largest sovereign wealth funds this week will help reduce concerns about their investments and ward off protectionist pressures from countries where they invest.
Under the proposed guidelines the IMF will not monitor adherence to agreed, voluntary principles by the funds, who manage around $2 trillion to $3 trillion in assets between them. Instead, it is expected that those that adopt the guidelines will be better regarded than those that do not.
Abu Dhabi United Group purchases Manchester City Football Club
Abu Dhabi United Group for Development and Investment (ADUG) has bought the English football club Manchester City, Dr Sulaiman Al Fahim, chief executive officer of Abu Dhabi-based real estate developer Hydra Properties, told Gulf News on Monday.
"The amount paid for the acquisition of the club cannot be disclosed. The acquisition will help the Abu Dhabi brand name and allow talented UAE players to play in the premier league and get access to all the world class opportunities that exist," said Al Fahim by telephone.
Al Fahim, a member of the Abu Dhabi United Group board, was the architect of the deal. Former Thailand Prime Minister Thaksin Shinawatra was the previous owner of Manchester City, one of the oldest English clubs founded in 1880.
Hong Kong Monetary Authority reports USD $1.8 Billion decrease in July 2008
HKMA reported a decrease in the exchange fund of HK$14.4 billion in foreign assets during the month of July, 2008. The investment portfolio is the sovereign wealth fund component which is combined with a backing portfolio that makes up the HKMA exchange fund.
Foreign assets, representing the external assets of the Exchange Fund, amounted to HK$1,169.3 billion. The Monetary Base, comprising Certificates of Indebtedness, Government‑issued currency notes and coins in circulation, the Aggregate Balance of the banking system and Exchange Fund Bills and Notes issued, amounted to HK$324.3 billion.
German Engineering Giant Siemens in talks with Gulf and Russian SWFs
Many gulf state sovereign funds are seeking investment stakes in large occidental engineering/infrastructure firms. Just recently General Electric and the Mubadala Development Company entered into a business partnership. Qatari Diar which is owned by the Qatar Investment Authority made a bid at the French engineering firm, Cegelec.
The Financial Times reports that "Siemens, Europe's biggest engineering group, has held talks with sovereign wealth funds from the Gulf, Russia and other regions in an attempt to expand its long-term investor base. Joe Kaeser, chief financial officer, said the German industrial conglomerate 'would very much welcome an active involvement' by such funds. 'We are very open to anyone who would want to join us as an investor,' he told the Financial Times.
The prospect of an SWF taking a large stake in a company as prominent as Siemens could prove politically contentious in Germany, where the growing influence of the funds has been heatedly debated."
Temasek delivers record profit of S$18 billion for Financial Year ended March 2008
Temasek Holdings (Private) Limited (Temasek) released its latest annual financial review for the year ended 31 March 2008. In its fifth year of publication, the Temasek Review 2008 provides the firm's financial, investment and operating highlights of the year.
During financial year ended 31 March 2008, Temasek achieved a record profit of S$18 billion on the back of strong operating performance of its portfolio companies and healthy realised gains from its direct investment activities.
Temasek's portfolio grew to S$185 billion, an increase of 13% from S$164 billion the previous year. On the back of a weaker US dollar, the value of Temasek's portfolio grew 24% from US$108 billion to US$134 billion. Shareholder equity increased 26% to S$144 billion over the same period. The increase in portfolio size was partly due to a new capital injection of S$10 billion by the Minister for Finance (Incorporated), Temasek's shareholder, as part of its asset reallocation. On a cumulative basis, Temasek remains a net contributor in dividends to its shareholder.
The government is planning to establish a sovereign wealth fund in fiscal 2009 that would place priority on innovative technologies using new energy sources and natural resources, government sources said Saturday. Amid surging prices of crude oil and other resources, the fund--tentatively named Innovation Sozo Kiko--will invest mainly in solar power generation, wind power generation, fuel cells, and other new energy technologies and natural resources.
The government is aiming to prevent excessive outflows of national wealth to countries rich in natural resources, and to build a mid- and long-term base for future economic growth. The government hopes these new policies will transform the economy into one that functions on drastically reduced resource consumption.
Initially, the government saw the fund as an entity to buy up dormant patents owned by companies and universities, aiming to use them to produce high-value-added goods across a wide range of industries.
According to the Financial Times, "Investments by Russian companies and sovereign wealth funds into the US are likely to face tougher scrutiny in Washington in the wake of the country's conflict with Georgia, experts predict.
While billions of dollars in US investment by Russian companies have so far sparked little controversy in the US Congress, Moscow's military action against its neighbour is expected to heighten concerns on Capitol Hill about Kremlin ties to Russian companies and its potential influence on US investments.
Gazprom, the energy giant majority-owned by the Russian government, said in June that it was considering building its presence in the US through acquisitions.
Any attempt by Gazprom to invest in the US was already likely to be closely examined by the Committee on Foreign Investment, or Cfius, the executive branch agency that investigates sensitive deals on national security grounds. But Cfius is now likely to view such a transaction even more sceptically."
Section 892 - US Internal Revenue Code -Income of foreign governments and of international organizations
TITLE 26, Subtitle A, CHAPTER 1, Subchapter N, PART II, Subpart D, Sec. 892.
Statute
Sec. 892. Income of foreign governments and of international
organizations
(a) Foreign governments
(1) In general
The income of foreign governments received from -
(A) investments in the United States in -
(i) stocks, bonds, or other domestic securities owned by
such foreign governments, or
(ii) financial instruments held in the execution of
governmental financial or monetary policy, or
(B) interest on deposits in banks in the United States of
moneys belonging to such foreign governments,
shall not be included in gross income and shall be exempt from
taxation under this subtitle.
(2) Income received directly or indirectly from commercial
activities
(A) In general
Paragraph (1) shall not apply to any income -
(i) derived from the conduct of any commercial activity
(whether within or outside the United States),
(ii) received by a controlled commercial entity or received
(directly or indirectly) from a controlled commercial entity,
or
(iii) derived from the disposition of any interest in a
controlled commercial entity.
(B) Controlled commercial entity
For purposes of subparagraph (A), the term ''controlled
commercial entity'' means any entity engaged in commercial
activities (whether within or outside the United States) if the
government -
(i) holds (directly or indirectly) any interest in such
entity which (by value or voting interest) is 50 percent or
more of the total of such interests in such entity, or
(ii) holds (directly or indirectly) any other interest in
such entity which provides the foreign government with
effective control of such entity.
For purposes of the preceding sentence, a central bank of issue
shall be treated as a controlled commercial entity only if
engaged in commercial activities within the United States.
(3) Treatment as resident
For purposes of this title, a foreign government shall be
treated as a corporate resident of its country. A foreign
government shall be so treated for purposes of any income tax
treaty obligation of the United States if such government grants
equivalent treatment to the Government of the United States.
(b) International organizations
The income of international organizations received from
investments in the United States in stocks, bonds, or other
domestic securities owned by such international organizations, or
from interest on deposits in banks in the United States of moneys
belonging to such international organizations, or from any other
source within the United States, shall not be included in gross
income and shall be exempt from taxation under this subtitle.
(c) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section.
Board of Governors of the Federal Reserve System - Friends or Foes? The Stock Price Impact of Sovereign
Wealth Fund Investments and the Price of Keeping Secrets
Abstract written by: Jason Kotter and Ugur Lel
This paper examines the stock price impact of 163 announcements of Sovereign Wealth Fund (SWF) investments. We document an average positive risk-adjuste
