sovereign wealth funds

By Tomás Guerrero, IE Business School

Nearly all muslim-majority countries currently import much of the food they consume, with imports, as in the case of the Gulf Cooperation Council (GCC) countries, above 70 per cent.

Thus they are net importers of food, and the vast majority of it is halal. In 2013, Muslims spent $1.2tn on food and drink, the equivalent of 17.7 per cent of total world expenditure on food in that year. Of this, $1tn was spent on halal food by the muslim communities in the 57 member countries of the Organisation of Islamic Cooperation.

There are three main factors explaining this dependency: adverse climate, the lack of the knowhow and technology needed in order to boost food productivity and the rapid growth of populations with increased disposable income who are starting to adopt Western patterns of consumption. Read more

By Juergen Braunstein, London School of Economics

Sovereign Wealth Funds (SWFs) could easily resolve Africa’s infrastructure funding issues, or go a long way toward doing so. So why are they so hesitant toward investments in Africa and what are the chances for change?

There is no lack in money. SWFs are keen to diversify into real assets with long-term growth prospects – ample opportunities for which exist in many parts of Africa.

Indeed, if SWFs – large state owned investment funds – were to steer a mere 1.3 per cent to 1.5 per cent of their total assets into sub-Saharan Africa, they could close the region’s infrastructure deficit over the coming years. Read more

Hat tips to a couple of beyondbrics readers for this one: the coining of a new economic predicament in the form of the stagno-squeeze, in which zero growth and rising prices leave governments and citizens squeezing every last drop of benefit from what they already have, given the difficulty of obtaining or producing anything more.

And how apt that Brazil’s government should immediately demonstrate the stagno-squeeze in action, by raiding its sovereign wealth fund to plug a widening hole in its budget. Read more

Six years after it was announced, Angola’s sovereign wealth fund is fully underway. It has received the final instalment of its $5bn initial endowment and has begun to take its funds out of cash and put them into longer-term investment.

In an interview with FT beyondbrics, José Filomeno Dos Santos (pictured), chairman of the Fundo Soberano de Angola (FSDEA), said that one third of the fund’s assets would be allocated to highly liquid securities such as cash, bonds and listed equities, one third into alternative investments in sub-Saharan Africa, and one third into what he called “opportunistic investments internationally: distressed assets that the fund could take advantage of, spin around and refocus.” Read more

News that Abdulmagid Breish has been removed from his position as chairman of the Libyan Investment Authority brings yet another tortuous diversion to the troubled institution’s management. But does it make much of a difference to the fund’s ambitions?

Breish was asked to leave his position because of an inquiry under Libya’s Political Isolation Law, a piece of legislation brought in last year that prohibits those who held high office with the Gaddafi administration from serving in senior roles in the post-revolutionary government. Read more

We’ve all heard of the Sage of Omaha. Enter the Sage of Singapore?

GIC, the Singaporean sovereign wealth fund fancies its chances. Like Warren Buffett, the fund, which is keen to boost its investment in Mexico, has a strategy of patience and long-term investment. Read more

By Eric Parrado of the Banking and Financial Institutions Regulation Authority of Chile

For centuries, pilgrims have made the journey to Santiago de Compostela to seek redemption. When, in 2008, sovereign wealth funds met in another Santiago, Santiago de Chile, it was not to seek forgiveness – for they had committed no sins. They came together to adopt the Santiago Principles, covering issues of importance for SWFs including the setting of clear objectives, better coordination with macroeconomic policies, good corporate governance and transparent investment and risk management frameworks. Read more

The retirement of Gao Xiqing as president of the China Investment Corporation, China’s sovereign wealth fund, has fund managers wondering what the change of leadership will mean for asset allocation and the fund’s use of external managers.

Gao, one of the CIC’s founders, and instrumental in many of its most well-known (and sometimes ill-fated) deals, is to be replaced by Li Keping, who is the chief investment officer. This is the second change in top leadership positions at CIC in less than a year, with Ding Xuedong becoming chairman of CIC in July 2013. Read more

Zimbabwe’s proposed sovereign wealth fund – gazetted in Harare last week – is unlikely to have a material impact on private investment. But, if well-managed, it could do wonders for the country’s bloated public sector. A draft parliamentary bill proposes that a maximum of 25 per cent of mining royalties should be paid into the fund to be managed by the Reserve Bank of Zimbabwe. The SWF will “support fiscal or macroeconomic stabilization” and the achievement of the government’s long-term development objectives. Read more

Africa is at the forefront of bringing financial services to the “unbanked” and new opportunities to seasoned investors. In Monday’s FT special report on Africa Banking and Finance, our correspondents examine the continent’s enormous potential and challenges, writes Justin Cash.

Africa editor Javier Blas looks at the growth of sharia-compliant investments across the continent, whilst Anousha Sakoui assesses bright new prospects for M&A activityRead more

Mugabe: management-speak

It’s a 15,000-word document setting out how the government will “prioritise its programmes… and address the country’s socio-economic challenges.” It’s one of the few substantial documents that analysts can get hold of to look for insights into an opaque administration’s intentions.

No, this is not China. It’s Zimbabwe, with this week’s publication of a document titled Zim Asset (Agenda for Sustainable Socio-Economic Transformation). So Robert Mugabe has also set out his stall for Zimbabwe’s next stage. What’s in it? Read more

Partners in wealth

Wednesday’s announcement that Russia and South Korea would work together on an economic project in North Korea slightly overshadowed another significant announcement linked to Putin’s Seoul visit: a new cross-border investment fund between Korea Investment Corporation and its Russian sovereign wealth fund counterpart, the Russian Direct Investment Corporation.

The fund will start out at $500m, with commitments of $250m apiece, but is expected to reach $1bn in time. It also gives an illustration of how the two sovereign wealth funds are evolving. Read more

The great potash saga rumbles on. With Uralkali’s chief executive in a Belarusian KGB cell, the global potash market paralysed by uncertainty and Belarus’s state coffers in jeopardy, China has jumped into the mix with a surprise decision by CIC, a Chinese sovereign wealth fund, to take a 12.5 per cent stake in the Russian miner.

On the face of it, the deal should bring the saga closer to conclusion. But don’t expect the paralysis to be lifted any time soon. Read more

Overseas funds have rushed to Japan this year to buy the bull market touched off by prime minister Shinzo Abe. And it seems there has been one big seller quite happy to let them: Beijing.

For the past six years companies from Toyota Motor to SoftBank have noticed a custodial account called OD05 cropping up on their shareholder registers. Sometimes identified as “SSBT OD05 Omnibus China”, and sometimes going by “OD05 Omnibus China Treaty”, it is has been linked in media reports to China Investment Corporation, the giant sovereign wealth fundRead more

The Gulf is set for economic growth and accumulation of financial reserves in 2013 says the Institute of International Finance.

Sound familiar? Well that’s because most macroeconomic forecasts make similarly rosy forecasts for the oil-rich region. But the IIF, the world bankers’ club, warns that the good times may not last – and the region’s governments need to pursue economic reform before the outlook changes. Read more

There is a new man at the top of the China Investment Corporation (CIC), China’s sovereign wealth fund, prompting debate about whether the change in personnel will also mean a change in approach.

Lou Jiwei (pictured), who is still listed in CIC’s website as chairman and chief executive officer, became China’s finance minister in March. His successor has not been formally named but it has been locally reported that he is Tu Guangshao, the executive vice mayor of Shanghai. Read more

As the guardian of the nation’s oil windfall, Azerbaijan’s state oil fund has traditionally been a highly conservative investor. But as the global economic slowdown takes the shine off fixed income instruments, Sofaz has embarked on a quest for higher yields. After a first foray into gold and European luxury real estate last year, the fund is sizing up the property market in southeast Asia. Read more

The departing chairman and chief executive of the Libyan Investment Authority has said he was about to appoint lawyers to seek compensation from banks including Société Générale and Goldman Sachs – banks he has accused in the past of causing losses worth billions of dollars.

In a wide-ranging interview published in Euromoney magazine, Mohsen Derregia (pictured), who is being ousted from the LIA after just 11 months in the top job, speaks passionately about his removal – which he is challenging – and the importance of the approximately $60bn sovereign fund. Read more

The investment by China Investment Corporation in Friday’s flotation of the Moscow Exchange carries several messages for observers seeking to understand the investment approach of China’s sovereign wealth fund. Read more

Forget sovereign debt for a moment. This is turning into the year of sovereign wealth, with Angola becoming the latest African country to create a fund to invest some of the proceeds of growing oil riches.

The sovereign wealth fund – known as Fundo Soberano de Angola (FSDEA) – will start with $5bn in assets, and look to invest primarily in sub-Saharan Africa. Angola joins Nigeria and Tanzania in launching or planning to launch a SWF in 2012. Read more