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Archived News - April 2008
4/28/2008
Saudi Arabia's Public Investment Fund is in the final stages of launching the kingdom's first sovereign wealth fund. But its early financial commitment will disappoint those hoping for another megafund.
Mansour Al-Maiman, secretary- general of the internally focused PIF, said an investment company wholly owned by PIF would be set up with initial capital of SR20bn ($5.3bn).
read more: Financial Times
4/28/2008
The US Senate Committee had a hearing on the Turmoil in U.S. Credit Markets: Examining the U.S. Regulatory Framework for Assessing Sovereign Investments.
David Marchick, a Managing Director and Global Head of Regulatory Affairs of The Carlyle Group said, "Second, the United States has a robust, layered set of laws and regulations that protect important governmental interests associated with any investment, sovereign or otherwise. FINSA protects against threats to national security, and CFIUS has demonstrated its willingness to block or mitigate problematic investments. DOD has its own set of regulations to protect the defense supply chain and classified information. Hart-Scott-Rodino triggers antitrust reviews for any significant acquisition.
And in any sensitive sector, there are a host of laws and regulators that provide additional protection. In the chemicals industry, for example, there are five federal regulators focused on safety, security, transportation and other issues; several state-level regulators; and more than a dozen federal statutes that impose various, wide-ranging controls on chemical investments and operations. The Fed, Treasury, OCC and OTS scrutinize investments in the banking sector. Similar laws and regulatory oversight exist in the telecommunications, energy, pharmaceutical, and transportation sectors, among others. Even if there were cause for concern associated with sovereign wealth funds, our existing legal and regulatory structure should capture and fix or block any problematic investments. "
read more: US Senate Committee
4/22/2008
The Korea Investment Corporation (KIC) gets an upgrade from an 8 to 9 in transparency rating as they listed their external managers and increased essential information to their fund site.
read more: Linaburg-Maduell Transparency Index
4/22/2008
"Washington, D.C.--The Treasury Department today issued proposed regulations that implement the Foreign Investment and National Security Act of 2007 (FINSA). The proposed regulations provide an update to regulations issued in 1991 that govern the Committee on Foreign Investment in the United States (CFIUS) and its process for national security review of certain foreign investments in U.S. businesses. They reflect reforms made to the CFIUS process by FINSA and the CFIUS executive order issued by President Bush on January 23 of this year.
'These regulations reflect America's strong and continued commitment to safeguarding U.S. national security in a manner that reinforces the longstanding U.S. policy of welcoming foreign investment. The proposed regulations increase clarity and make additional improvements based on experience,' said Assistant Secretary for International Affairs Clay Lowery."
4/21/2008 - US Treasury- Proposed Regulation on Mergers, Acquisitions, and Takeovers by Foreign Persons
read more: US Treasury Press Release
4/21/2008
During a speech last week in Washington, the Governor of the Reserve Bank of India, Yaga Vednugopal Reddy reinforced beliefs that India has been in the works of creating a reserve investment corporation, a type of sovereign wealth fund. In his speech, Yaga Vednugopal Reddy stated that India's foreign currency reserves, which currently stand as the World's fourth-largest, are inhibited by the Reserve Bank's policy of low risk and liquidity. Reddy continued his statement with, "Given the limitations placed on the central bank by its mandate, it will be appropriate to bestow this responsibility on a different sovereign entity."
The type of sovereign wealth fund presumed to be created is a reserve investment corporation, which manages non-commodity based assets to increase returns on reserves. These assets, in the form of excess foreign currency reserves, were reported this past February by the IMF to be valued at U.S. $301.235 billion [1]. The goal of the presumed Fund will be to earn higher returns through diversifying into equity investments rather than lower risk investments such as treasury bonds.
While Reddy's speech expressed concerns of dynamic risks involved with managing a sovereign wealth fund, India has a bit of experience in the world of sovereign investment vehicles. The India Infrastructure Finance Company Limited (IIFC), established in August of 2004, provides long-term debt for financing world-class infrastructure in India. India's Prime Minister, Dr. Manmohan Singh sits as chairman of the IIFC. The Ministry of Finance of India is credited for the creation of the IIFC after deliberations with the Planning Commission, and financial institutions. The creation of the IIFC was approved by the committee on infrastructure. This vehicle, which prefers Public Private Partnership Projects, has experience with raising funds from domestic and external markets and lending up to 20% of the needed capital for infrastructure projects. Aside from equity, the IIFC raises long-term debt through currency debt raised on the open market, debt from multilateral and bilateral institutions, and foreign currency debt through external commercial borrowings.
Although the IIFC differentiates itself on a multitude of levels from a sovereign wealth fund, there are high levels of experience that may be related to managing a new sovereign entity. One may question whether or not the IIFC is ready to take on the new responsibility of managing a sovereign wealth fund, but without the use of external managers there is no other internal government-owned authority more appropriate for the job.
The views in this publication are expressed by Carl Linaburg.
Carl Linaburg is the Cofounder and Vice President of the Sovereign Wealth Fund Institute.
www.swfinstitute.org
Back to Carl Linaburg's Research
4/15/2008
Many of the G-7 countries are signing on to the idea of a code of conduct for sovereign wealth funds as some of the sovereign funds continue to protest the concept. At an IMF meeting, the Japanese Finance Minister Fukushiro Nukaga said "I support the IMF's action to make full use of its experience in monitoring movements in international capital flows, and formulate best practices in the areas of governance, institutional arrangements and transparency."
read more: Japan Times
4/11/2008
UPDATE: The bill has been withdrawn due to little support.
The Governor of California makes the case of why this divestment bill will be ineffective and will only end up hurting pension investors.
read more: LA Times
4/7/2008
The Sovereign Wealth Fund Institute contributed information to CBS News 60 minutes for this segment that was aired on April 6th, 2008.
4/4/2008
The State Administration of Foreign Exchange (SAFE) which manages China's foreign reserves which are worth around US$1.65 trillion is acting more like a sovereign wealth fund these days. It has recently acquired a large stake of around 1.8 billion in the heavily capitalized French oil company Total.
4/4/2008
The Vietnamese State Capital Investment Corporation and Qatar Investment Authority have set an agreement to create a US$ 1 billion investment fund to invest in Vietnamese companies. We believe that Vietnam is trying to open up its vast number of state owned enterprises to foreign investors.
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