It’s acronym war. Sovereign wealth funds in Norway and Russia are backing away from Irish and Spanish debt, sending bond prices down and yields up – in some cases to record levels. Rumour has it the ECB is trying to help by buying peripheral eurozone debt, which is slowing but not halting rising yields.
So the big question is: will the rescue fund be needed? The ECB’s largest weekly bond purchase was about $23bn, after all, and these SWFs between them command $663bn. What proportion of that is invested in Spain and Ireland, we can’t be sure, but the (very short) list of Russia’s remaining investable countries suggests the Russian holdings in each country were significant.
Take Ireland. Irish 10-year bond yields reached record highs of 7.53 per cent today. Not a lot has changed in the country itself. But (perhaps ill-timed) discussions on the shape of a permanent rescue fund in the EU have changed a great deal. First, the possibility of a debt restructure is alive and well; a permanent fund is needed, after all. Second, there is talk that bondholders will have to bear some of the loss in the case of a restructure. Default no longer means delay: it might mean a significant loss.
The point at which the Eurozone Financial Stability Fund would offer its services, and the rate at which it would lend are unknown. A mooted rate is 8 per cent, and Ireland seems perilously close. Two things here. Read more
If you can exercise rights by owning just one share of a stock, imagine what you could do with $440bn.
Europe’s largest stock investor – already following quite strict ethical guidelines – is to become more proactive in its pursuit of good. For example, where the Government Pension Fund might previously have excluded a company from its investment universe, it might now use the stock-holding to effect some change. “Active ownership or observation might reduce the risk of continued violations of norms,” says the Finance Ministry statement. Read more
Should the state buy up your pensions and invest them in roads and railways?
The idea is that a US sovereign wealth* fund would dip into public and private pension savings and invest the money in much-needed infrastructure. If it worked, the economy would benefit, infrastructure would benefit, pensions would receive a healthy return and savings would be made for the next generation. Read more
Yes, if rumours are true, China Investment Corporation (CIC) is set to receive a $250bn capital injection, not $200bn as previously thought. The bumper bonus is rumoured to be due before Chinese New Year, February 14.
CIC, which has been active securing energy and other resources, was formed in 2007, and currently has about $300bn under management. Experts say an additional $250bn would take it to the top of the league, above both Norway and Abu Dhabi (even though it doesn’t seem it would from this table). Read more
Norway’s sovereign wealth fund has excluded 17 tobacco producers from its $450bn portfolio for ethical reasons, the government said today. “The divestment of shares in these companies has now been completed,” the finance ministry said.
The central bank-managed Government Pension Fund follows ethical guidelines set by the government and in the past has excluded companies that produce nuclear arms or cluster munitions, damage the environment or abuse human rights or workers’ rights. Read more