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SWFs: The Bull's Best Friend? |
rffrydr
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 Posted: Sat Aug 04, 2007 10:06 pm Post subject: SWFs: The Bull's Best Friend? |
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Lawence Summers succinctly captures some of the contradictions in Sovereign Funds evolution and practice. And now, more than ever, it about following the money--notwithstanding they, "shake the logic of capitalism."
| Quote: | HEADLINE: Sovereign funds shake the logic of capitalism
BYLINE: By LAWRENCE SUMMERS
BODY:
For some time now, the large flow of capital from the developing to the industrialised world has been the principal irony of the international financial system. In 2007 this flow will total well over half a trillion dollars, a figure that will be comfortably exceeded by the build-up in reserves and sovereign wealth funds (SWFs) in developing countries.
Indeed, Morgan Stanley has estimated on reasonable assumptions that there is now close to Dollars 2,500bn (Pounds 1,200bn) in SWFs and that this figure will increase to Dollars 5,000bn by 2010 and Dollars 12,000bn by 2015.
Inevitably, and appropriately, countries possessed of publicly held foreign assets far in excess of anything needed to respond to financial contingencies feel pressure to deploy them strategically or at least to earn higher returns than those available in US Treasury bills or their foreign equivalents. Even without this pressure, SWFs are now growing at a faster pace than the global rate of new issuance of traditional reserve assets.
There is plenty of room for debate over how large these funds should become. (Does China really need a saving rate in excess of 50 per cent that all but forces hundreds of billions of dollars in reserve growth?) But on any plausible path over the next few years, a crucial question for the global financial system and indeed for the global economy is how these funds will be invested.
The question is profound and goes to the nature of global capitalism. A signal event of the past quarter-century has been the sharp decline in the extent of direct state ownership ofbusiness as the private sector has taken ownership of what were once government-owned companies. Yet governments are now accumulating various kinds of stakes in what were once purely private companies through their cross-border investment activities.
In the last month we have seengovernment-controlled Chinese entities take the largest external stake (albeit non-voting) in Blackstone, a big private equity group that, indirectly through its holdings, is one of the largest employers in the US. The government of Qatar is seeking to gain control of J. Sainsbury, one of Britain's largest supermarket chains. Gazprom, a Russian conglomerate in effect controlled by the Kremlin, has strategic interests in the energy sectors of a number of countries and even a stake in Airbus. Entities controlled by the governments of China and Singapore are offering to take a substantialstake in Barclays, giving it more heft in its effort to pull off the world'slargest banking merger, with ABN Amro.
To date most of the official commentary on the issue of SWFs has been framed in terms of traditional arguments about cross-border capitalflows. US and UK officials have raised -concerns that focus only on the desirability of reciprocity and transparency and on how to treat sectors that trigger national security questions. Others, particularly in -continental Europe, have been less positive and have emphasised nationalist considerations about the benefits of local ownership and control.
What has received less attentionare the particular risks associatedwith ownership by government-controlled entities, particularly where the ownership stake is taken through direct investments. The logic of the capitalist system depends on shareholders causing companies to act so as to maximise the value of their shares. It is far from obvious that this will over time be the only motivation of governments as shareholders. They may want to see their national companies compete effectively, or to extract technology or to achieve influence.
We have seen the degree of concern over News Corp's attempt to buy The Wall Street Journal. How differently should one feel about a direct investment stake of a foreign government in a media or publishing company?
Apart from the question of what foreign stakes would mean for companies, there is the additional question of what they might mean for host governments. What about the day when a country joins some "coalition of the willing" and asks the US president to support a tax break for a company in which it has invested? Or when a decision has to be made about whether to bail out a company, much of whose debt is held by an ally's central bank?
All of these risks would be greatly mitigated if SWFs invested through intermediary asset managers, as is the case with most institutional pools of capital such as endowments and pension funds. The experience of many endowments and pension funds suggests that this approach is in most cases likely to produce the best risk-adjusted returns.
To the extent that SWFs pursue different approaches from other large pools of capital, the reasons have to be examined. The most plausible reasons - the pursuit of objectives other than maximising risk-adjusted returns and the ability to use government status to increase returns - are also most suspect from the viewpoint of the global system.
None of this is to propose policy. That can come only after the investment policies of SWFs have been much more extensively debated and many details have been clarified. But it is to register a cautionary note about the debates over SWFs so far.
Governments are very different from other economic actors. Their investments should be governed by rules designed with that reality very clearly in mind.
The writer is the Charles W. Eliot -professor at Harvard University
LOAD-DATE: July 30, 2007 |
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rffrydr
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| Posted: Fri Feb 24, 2012 8:42 am Post subject: |
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China unveils "master plan" for a great going out. Don't look to take fast money direct investments for another decade--but look for chinese to try and take advantage the US banks have been, NOW:
| Quote: | | ....“the shrinkage of western banks and companies has vacated space for Chinese investments” and presented a “strategic opportunity”. |
http://www.cnbc.com/id/46504656
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rffrydr
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| Posted: Sat Dec 10, 2011 9:03 am Post subject: |
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....but wait a minute:
| Quote: | RTRS-CHINA CENTRAL BANK TO CREATE $300 BLN FX INVESTMENT VEHICLE -SOURCE
10:59 09Dec11 RTRS-CHINA INVESTMENT VEHICLE TO COMPRISE TWO FUNDS, ONE FOCUSED ON EUROPE AND ONE ON U.S. -SOURCE |
There was Hu's veiled promise last month: "they're not ready...yet."
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rffrydr
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| Posted: Mon Oct 10, 2011 9:16 am Post subject: |
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As predicted way back when, china SWF's being applied to chinese needs, big move into banks last night and as much a part of our rally today as "The Merkozy Line."
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rffrydr
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| Posted: Wed Feb 23, 2011 10:25 am Post subject: |
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To wit: The Libya Investment Authority backs a hedge fund in Knightsbridge, FM Capital.
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rffrydr
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| Posted: Tue Feb 22, 2011 7:53 pm Post subject: |
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Back to the "Arabs" referenced in "Liar's Poker" below--only different.
Forgetting crude for a moment (which is more than we can afford) some of the most direct direct investment has come from these autocrats. Other than Kuwait, which can fully align its foreign investments with its popular needs, we may be seeing sun set on this old bid.
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rffrydr
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| Posted: Fri Jan 28, 2011 10:43 am Post subject: |
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Chinese bid whispers
Published: January 28 2011 09:47 | Last updated: January 28 2011 12:13
| Quote: | In Liar’s Poker, traders blamed “the Arabs” for any mysterious market swings. These days, the catch-all explanation is China. Shares up? Some State-Owned Enterprise must be mulling a bid.
Anyone piling into a stock on Chinese rumours should remember, though: an approach may not materialise, and if it does, success is far from guaranteed . Dealogic analysis shows China’s failure rate – the proportion of announced cross-border deals withdrawn, rejected or allowed to expire – was the world’s highest in 2009, at 12 per cent and fell only to 11 per cent last year. Blame Sinophobia or clumsy bid tactics, but until the failure rate gets closer to US or UK levels (2 per cent and 1 per cent, respectively, in 2010) talk of China shaping the world remains an exaggeration. |
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rffrydr
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| Posted: Thu Mar 18, 2010 9:29 am Post subject: |
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India gets its oil marching orders:
| Quote: | *INDIA URGES STATE-OWNED OIL COMPANIES TO BUY ASSETS OVERSEAS
March 18 (Bloomberg) — India, planning a sovereign wealth fund to
help companies compete with China for overseas energy assets, has
ordered state-run Oil & Natural Gas Corp. and Oil India Ltd. to speed up
purchases in the year starting April.
NH
“We are urging our companies to get at least one big asset each
next fiscal” year, Oil Secretary S. Sundareshan, the senior-most
bureaucrat in the petroleum ministry, said in a telephone interview in
New Delhi today. “We are looking for producing assets overseas.”
China, with $2.4 trillion of foreign-exchange reserves and a $300
billion sovereign fund, has outpaced India in the global quest for
resources to feed the world’s fastest-growing major economies. Chinese
companies spent a record $32 billion last year buying oil, coal and
metals assets abroad, while a $2.1 billion investment by ONGC was
India’s sole energy acquisition.
“Energy security is one of the most pressing issues for India,”
Vikas Pershad, Chicago-based chief executive officer of Veda Investments
LLC, said by telephone. “The companies will need a push and all the help
they can get from the government.” |
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rffrydr
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| Posted: Thu Mar 18, 2010 6:21 am Post subject: |
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| Posted: Thu Dec 24, 2009 10:07 pm Post subject: |
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China sovereign fund may get extra $200 billion:
http://www.cnbc.com/id/34505167
| Quote: | Chinese sovereign wealth fund, China Investment Corp, may get $200 billion in new funds from the country's foreign exchange hoard, the Financial Times reported Monday.
The amount would be similar to the $200 billion CIC received when it was set up in 2007 but a final decision has yet to be made, said FT quoting unidentified government officials and people familiar with the $300 billion fund.
A CIC spokesman in Beijing was not immediately available for comment.
China's foreign exchange reserves are the largest in the world and rose by $141 billion to $2.27 trillion in the third quarter. |
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