Tag Archives: sovereign wealth funds (SWF)

Here are the three terrorists you will never see. Candidate No 3

17 Saturday Jan 2015

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This Candidate is by far the most destructive in so far that it concerns you and I and not just Profit for Profit sake.

We could call it : The resource curse.

Sovereign Wealth Funds (SWF) are the most courted investors in the world.

In a way, an SWF can be a fund for future generations, aiming to create a wealth reserve for a future time where commodity revenues dwindle, either because reserves run out, or prices go down.

Owned or controlled by States, albeit separate from central banks, Sovereign Wealth Funds (SWFs) draw their revenue from either natural resources or from trade surpluses.

With the massive accumulation of foreign reserves, these institutions have moved away from a passive approach to asset management to a more long-term proactive investment strategy, embodying a form of State capitalism.

They have become absolutely massive in size in the not-too distant future will have powerful implications for the financial markets.

As I have discussed in the past, I am increasingly concerned about Capitalist financial globalization and the Inequality it is creating in the World.  (See previous posts)

You need look no further to explain the present problems in the World.  The Gap between the Haves and Have not’s. 

My calculations show that the total size of the SWFs will reach US$12 trillion by the end of 2015, and surpass the size of the world’s total official reserves within five years.

With the drop in Oil revenues the SWFs of tomorrow of Oil rich countries are likely to be more interested in strategic companies that possess higher-tech capabilities or techniques.  Higher-tech companies and even foreign banks will be primary targets of these funds.

By privatizing the limited resources that are left in the world they are turning us all in to commodities.

As the world economy slows their investments into emerging markets remain all but unnoticed to the Joe public.

They are now investing a wide range of investment objectives, along with continually evolving time horizons and risk appetites.  Some SWFs have become increasingly active in corporate acquisitions and other strategic transactions. Though many of these funds prefer to invest in debt or non-controlling equity positions, a small but growing number are seeking substantial minority and controlling equity stakes.

ADIA, Abu Dhabi’s sovereign-wealth fund, with assets of $773 billion, now employs 1,500 people. South Korea’s National Pension Service ($430 billion) will boost its investment team by 60 people this year. Canada’s Pension Plan Investment Board recently opened a fourth international office, in São Paulo, to enhance its ability to source and manage complex, sizable investment opportunities.

We should be urging Government policymakers in countries where companies have been targeted for investment to balance the perceived threats of SWFs against their potential benefits, particularly their ability to provide a stabilizing source of global liquidity in the current economic environment.

There rising prominence and lack of transparency of SWFs should be raising concerns among governments and other market participants. For this reason, companies intent on obtaining funding from or investing with SWFs should be scrutinized particularly if a transaction is perceived to involve a country’s strategic or security interests.

Recently they have become major participants in the financial institutions and alternative investment industries, with several high-profile investments in well-known private equity firms and financial services companies.

The next step is to ally with other like-minded investors.

Here are a few examples of what is going on.  

Sovereign wealth funds are flying under the radar again.

Seven of the 10 largest sovereign wealth funds are administered by authoritarian nations (China, Singapore and Saudi Arabia)

Not to mention those controlled by nations that give American strategists pause, including Russia, Kazakhstan, Libya, Iran, Azerbaijan, Venezuela and Turkmenistan.

Or the competing funds within its own very backyard

Alaska ($51.7 billion), Texas ($37.7 billion), New Mexico ($19.8 billion), Texas, again ($17.2 billion), Wyoming ($5.6 billion), Alabama ($2.5 billion), North Dakota ($2.2 billion) and Louisiana ($1.1 billion).

Nearer Home they are barely mentioned by Economic goo-roues or referred to by cash strapped Governments that are selling off their people’s countries assets.

Qatar Gaining Power in UK Through Financial Back Door.

Privatization is an emerging theme in the government’s plans for the public sector. The chancellor’s recent budget speech championed the sale of key public assets and relied heavily on foreign investment as a spur for growth.

David Cameron will clear the way for a multi billion-pound semi-privatisation of trunk roads and motorways as he announces plans to allow sovereign wealth funds from countries such as China to lease roads in England.

A Canadian pension fund, a British one and Kuwait’s sovereign-wealth fund last year bid (unsuccessfully) for Severn Trent, Britain’s second-largest publicly traded water company.

A Singaporean sovereign-wealth fund recently bought a significant share in RAC, a British car-breakdown service, outbidding private-equity firms such as Blackstone, CVC and Charterhouse.

Two of London’s most famous streets are now part-owned by Norway’s sovereign wealth fund after it paid £343m to snap up a share in an estate covering four acres of the capital’s West End.

The gallery-studded Cork Street are part of the Pollen Estate in which Norges Bank Investment Management (NBIM) has bought a 57.8% stake.

The investment arm of the Qatari armed forces has bought the five-star Renaissance hotel in central Barcelona for €78.5m (£65m) Sovereign wealth funds put an extraordinary Eu 40 billion of investment into Spain between 2009 and 2014.

Britain’s £8.6bn crown estate should be turned into a sovereign wealth fund to rival government-backed investment funds that have sprung up across Europe, the Middle East and Asia in the last 20 years.

Opposition to Europe‘s austerity programmes intensified on Friday as a top official at China’s £300 bn sovereign wealth fund warned that the public are at “breaking point”David Simonds, London property sell off, 1 July, 2012

Heathrow is now part-owned by the Chinese state after the country’s sovereign wealth fund acquired a 10% stake in the UK’s largest airport.The deal means Heathrow will be more than 40% controlled by the Chinese, Qatari and Singaporean governments,

The £2bn Shard, all 1,016 feet of it, will be illuminated to show off the Qataris’ latest trophy in the capital. Already in their shopping basket are Canary Wharf, Harrods and One Hyde Park, the world’s most expensive block of flats.

Gulf state of Qatar has added Shell to its growing roster of western investments by buying a holding in the company.

DUBAI—Qatar has replaced the head of its $300 billion sovereign-wealth fund with a member of the wealthy Gulf State’s royal family. Sheikh Abdullah bin Mohamed bin Saud Al-Thani will take the reins.

There is no reason that we the people should not include them in our United Nations Resolution to place a 0.05% World Aid Commission on all acquisitions they make in the world.

Like Electronic Foreign Exchange Trading and High Frequency Trading, Sovereign Wealth Funds contribute nothing to Society other than providing funds to make more profit.

If we are to have a world which is worth living out our lives in we must use Greed to provide a level playing field.

 

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Sovereign Wealth Funds. Alarm.

30 Sunday Nov 2014

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<img alt=”” src=”http://media-cdn.tripadvisor.com/media/photo-s/04/79/29/e0/1728.jpg”/>
This photo of 1728 is courtesy of TripAdvisor

Its back to my hobby-horse the ongoing Privatization of the World.

It is of course is happening in a clever way, with very careful paperwork, so we have the option of pretending that it’s not actually happening, right up until the bitter end.

I often wonder is it just me. You barley hear a mummer about it from any other quarter. Other than Ireland where the population has woken up to the Privatization of water.

Perhaps it’s that no one gives a tosser.

That our Governments are systematically divesting themselves of bits and pieces of their own sovereignty, by transfer of assets and service functions from public to private hands.

It’s taking place all over the world without really anyone noticing it happening — often not even the people are asked to vote formerly on the issue.

It is my contention that it is the quality of the state rather than the fact that assets are owned by the state that matters more. In developing countries with extensive market and information failures the state should play an important role in promoting equitable development over the long run not sell of their assets to the highest buyers.

At the political level privatization has been challenged by workers affected by attendant retrenchments and the restructuring of internal and external labor markets consequent upon privatization that has resulted in increased worker vulnerability, and by consumers who have often been negatively affected by increased prices based on cost recovery pricing regimes instituted as a consequence of privatization, or by reduction in service provision arising from “efficiency enhancing” measures as a consequence of privatization.

No one knows precisely how much money is held by SWFs but it is estimated that they currently own $3.5 trillion in assets, and within one decade they could balloon to $10–15 trillion. (equivalent to America’s gross domestic product, an amount larger than the current global stock of foreign reserves of the USA which is about $5 trillion.)

Imagine the biggest and most aggressive hedge fund on Wall Street, then imagine that same fund is fifty or sixty times bigger and outside the reach of any other major regulatory authority, and you’ve got a pretty good idea of what an SWF is.

The rise of sovereign wealth funds (SWF) as new power brokers in the world economy can no longer be looked at as a singular phenomenon but rather as part of what can be defined a new economic world order.

This new order has been enabled by several mega trends which operate in a self-reinforcing manner, among them the meteoric rise of developing Asia, accelerated globalization, the rapid flow of information and the sharp increase in the price of oil by a delta of over $100 per barrel in just six years which is enabling Russia and OPEC members to accumulate unprecedented wealth and elevate themselves to the position of supreme economic powers.

It will not be long before transactions involving investment by sovereign wealth funds, as with other types of foreign investment, may raise legitimate national security concerns.

Concerns are growing that the purpose of the investments might be to secure control of strategically important industries for political rather than financial gain.

They on the other hand see themselves as passive, long-term investors, driven solely by the need to make a good return on their country’s surplus cash.

There is a degree of looking through the wrong end of the telescope to all this.

Sovereign wealth funds have with total assets estimated at $5.4tn as of October 2013. The funds have gained more than $750bn in additional assets since 2012 of which only $60 billion has gone to recent bank bailouts.

They are rapidly becoming owners of big chunks of American,the UK and Europe infrastructures.

Unlike the central banks of most Western countries, whose main function is to accumulate reserves in an attempt to stabilize the domestic currency, most SWFs have a mission to invest aggressively and generate huge long-term returns.

The origin of these SWFs is not even relevant, necessarily.

What is relevant is that these funds are foreign.

They are state-owned investment pools that thanks to a remarkable series of events in the middle part of the last decade they are buying up your governments services such as water treatment, parking meters, toll highways, rail links, ports, public infrastructure projects, commercial real estate all delivering a lot of cash into the coffers of sovereign wealth funds like the Qatar Investment Authority, the Libyan Investment Authority, Saudi Arabia’s SAMA Foreign Holdings, and the UAE’s Abu Dhabi Investment Authority.

Some recent activity:

(The first was the announcement that the Qatari royal family is planning a large investment in the controversial £50billion HS2 rail link, focused on a major new station and housing scheme in central Birmingham.

Qatar Investment Authority, one of the world’s largest sovereign wealth funds, is soon to table a new bid to take over Songbird Estates which owns the iconic Canary Wharf tower in east London, one of the best-known modern symbols of British capitalism.  

Libya’s sovereign wealth fund is suing French bank Societe Generale in a British court for $1.5 billion for allegedly channeling bribes to allies of the son of slain dictator Muammar Qaddafi.  

Iran’s President Mahmoud Ahmadinejad said on Saturday the country’s sovereign wealth fund could reach $55 billion by March next year if oil prices kept high.

Iran earned $100 billion in oil revenue in 2011. Iran is both the world leader in Shariah Compliant Finance and the world’s most active state sponsor of Jihadist terrorism.

Deutsche Bahn Seeks Sovereign Funds for the state-owned railway, is seeking to sell shares to sovereign wealth funds in the Middle East and Asia during the initial public offering. )

What is more to the point, is we’re being colonized/Privatized.

Industry today may not be regarded as such an industry tomorrow, and vice versa.  Just look at the explosion of energy prices — thanks to a bubble that Western banks and perhaps some foreign SWFs had a big hand in creating.

Out side any regulation these funds are free to plunder the earth in the form of Hedge Funds( (which they have a bunch) with out anyone knowing who the funds investors are.

The point here is if these funds.

Are not regulated by the relevant international bodies determining which kinds of information about their balance sheets, management structures, investment objectives, portfolio breakdowns, and so forth should be supplied by sovereign wealth funds. The European Union could then put curbs on funds failing to comply with the standards for the publication of such information.

One way or the other they should be Capped ( See previous posts)

 

 

 

 

 

 

 

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