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Archived News - December 2008
12/29/2008
Profile update: It is a fund that is mandated to manage the sovereign wealth of the United Arab Emirates federal government. Established in November 2007 by Emiri decree, the Emirates Investment Authority (EIA) is the first federal sovereign wealth fund for all seven states comprising the United Arab Emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain).
The EIA is the sole entity responsible for the future stewardship of federal government stakes in over 30 corporations across the GCC, including Etisalat, Du, Gulf International Bank, United Arab Shipping Company and Gulf Investment Corporation.
The objective of the EIA is to achieve attractive financial returns and diversify the government's asset exposure by cultivating sovereign funding arrangements in tandem with first-class investment opportunities in the public and private markets of the GCC and overseas.
read more: EIA Profile
12/29/2008
"Dubai Investments (DI) is willing to sell up to 40 per cent stakes in any of its subsidiaries when the market situation improves, a top official said. He added that the global economic crisis is not expected to have a significant impact on future cash flows.
'We are open to selling stakes in any of our subsidiaries and possible buyers could include sovereign wealth funds,' DI Chief Executive Officer Khaled Kalban told Emirates Business.
DI has also put all plans for launching initial public offerings (IPOs) for any of its subsidiaries on hold, owing to market conditions. The company, with 46 subsidiaries, had said it would launch an IPO for M'sharie, its private equity arm, within 12 to 18 months, but has put the plans on hold."
read more: Emirates Business
12/28/2008
"Today, The Dow Chemical Company has been verbally informed by our partners at the Kuwait Petroleum Corporation (KPC) and Petrochemicals Industries Company (PIC) about a decision made by the Kuwait Supreme Petroleum Council (SPC), to reverse its prior approval of the agreement between Dow and PIC to enter into K-Dow Petrochemicals, a planned 50-50 joint venture company. The partners have informed us that there will be official written notification of the decision within the next few days.
Dow is extremely disappointed with the decision, and is in the process of evaluating its options pursuant to the Joint Venture Formation Agreement. While disappointed in this outcome, Dow remains committed to its Middle East Strategy. "
read more: DOW Chemical
12/28/2008
SCIC reports that,"The Ministry of Finance (MOF) officially transferred management of the SOE Reform & Equitization Support Fund (the Fund) to the State Capital Investment Corporation (SCIC), pursuant to Decision 113/2008/QĐ-TTg dated 18 August 2008 of the Prime Minister."
read more: SCIC
12/26/2008
Brazilian President Luiz Inacio Lula da Silva has signed a law creating a sovereign wealth fund to buffer the country from the global financial crisis and help Brazilian companies boost trade and expand overseas. The presidential press office said in a statement that Silva signed the law on Wednesday and also inked a provisional measure endowing the fund with the equivalent of nearly $6 billion. The statement provided no details.
The provisional measure must still be submitted to Congress for its approval. Earlier this year, Finance Minister Guido Mantega said money for the fund would come from the federal government's primary budget surplus expected to come in at 3.8 percent of gross domestic product.
read more: The Associated Press
12/23/2008
Which Wall Street Firm will next be bailed out by foreign investors?
 Morgan Stanley (62)
Goldman Sachs (49)
JP Morgan Chase (26)
Other (17)
Bank of America (16)
Out of 170 Total Votes, from October 2008 - December 23, 2008
12/22/2008
New sources say, "Abu Dhabi Investment Authority, the world's largest sovereign wealth fund, said it had no direct investments in a firm managed by Bernard Madoff, a newspaper reported on Monday. ADIA was denying a New York Times report which said the fund had 'entrusted some $400 million' in a firm of the U.S. fund manager accused of running a $50 billion fraud. ADIA said it had invested $132 million three years ago in a fund that had partial investment in Madoff's Investment Securities, which could have suffered some losses, al-Ittihad newspaper reported. 'ADIA affirmed that is has not invested directly in Investment Securities," the Arabic-language daily reported.'"
read more: Reuters
The Abu Dhabi Investment Authority (Adia), the world’s largest sovereign wealth fund, may also have lost money in the US$50 billion (Dh183.6bn) ‘ponzi’ fraud scheme carried out by New York investment manager Bernard Madoff.
In 2005, Adia indirectly invested around $400m with Mr Madoff through a fund called Fairfield Sentry Ltd, according to a report in the New York Times on Saturday, which cited a description of Fairfield’s investors supplied to a prospective client. Adia has since withdrawn portions of its original investment from Fairfield Sentry twice, but may still have had some $132 million in the fund as of last year. Fairfield Sentry is part of Fairfield Greenwich Group, which is understood to have invested more than half of its assets under management with Mr Madoff’s investment company.
read more: The National
12/18/2008
Bloomberg reports that, "Gilles Michel, a member of the management committee of PSA Peugeot Citroen, was picked by French President Nicolas Sarkozy to head the country’s 20 billion-euro ($29 billion) sovereign wealth fund, three people with direct knowledge of the matter said.
Sarkozy chose Michel, 52, from two nominees put to him by the fund’s board, which may vote on the appointment tomorrow, said the people, who requested anonymity because the information isn’t public.
Sarkozy said on Nov. 20 that the government and the state- owned lender Caisse des Depots et Consignations will jointly raise 6 billion euros for the fund, which is being created to prevent the takeover of strategic French companies by foreign predators. The fund will also help companies to cope with the effects of the credit freeze."
read more: Bloomberg
12/17/2008
Reuters states, "Norway's sovereign wealth fund on Wednesday threw a spanner into U.S. investor Warren Buffett's deal to take over Constellation Energy, seeking to buy time to evaluate a rival bid by Electricite de France.
Norway's $339 billion oil fund said it filed a law suit in a Maryland court to delay a Dec. 23 Constellation shareholders' meeting due to vote on a takeover by MidAmerican Energy Company, a unit of Buffett's Berkshire Hathaway Inc.
'In our opinion, the MidAmerican agreement undervalues Constellation, and we expect the board to work for a solution that offers the highest value,' said Anne Kvam, head of corporate governance at the fund.
MidAmerican's $4.7 billion takeover in September was backed by Constellation's board. However in early December Electricite de France said it would pay $4.5 billion for half of Constellation's nuclear assets and give the U.S. company the option to sell it up to $2 billion more of its non-nuclear assets.
Norway's fund said it holds 4.8 percent in Constellation and likes to take an active role in the corporate governance of the companies in its portfolio. It is regarded as the world's most transparent sovereign wealth fund and is the second largest after the United Arab Emirates' fund."
read more: Reuters
12/15/2008
The report states, "Sovereign Wealth Funds (SWFs) are expected to become one of the most significant investors in the world’s commercial property markets, potentially investing as much as US$725 billion over the next seven years, according to a new global report from CB Richard Ellis Group, Inc.
Although more than half of the SWFs are believed to already hold direct commercial real estate investments, allocations to the sector are expected to rise substantially. The potential impact on the global real estate market is significant.
Ray Torto, Chief Global Economist at CB Richard Ellis, explained: 'Given that the real estate sector’s investment characteristics – current income combined with long-term appreciation -- closely match SWF requirements, we expect them to increase their weighting of commercial property to approximately 7% of their total assets. With nearly US$4 trillion of total assets currently under SWF control, a 7% allocation would mean worldwide commercial real estate investments totaling US$280 billion. To put this number in context, the entire U.S. institutional-grade property portfolio owned or managed by investment managers and plan sponsors is valued at approximately US$330 billion1 today.'
Mr Torto continued: 'Looking to the longer term, the SWFs’ potential for future property investment is even more significant. It has been estimated that the SWFs could reach total assets of US$12 trillion2 by 2015. A 7% allocation implies SWFs would make approximately US$725 billion3 of net property investments over the next seven years.'
The influence of SWFs is expected to be felt across the world. In order to achieve target allocations, SWFs will need to diversify future investment widely across geographies, sectors and investment vehicles. Thus far, SWF property investments have been largely concentrated in the U.S. and the Middle East.
'Although SWFs are likely to continue to focus on core real estate product in major markets, they will have to put capital to work in new geographies and emerging sectors. Favored future destinations are expected to include Japan, the U.K. and other countries with currencies that are not held in the SWF’s foreign reserves,' said Michael Haddock, Director EMEA Research, CB Richard Ellis.
Mr Haddock continued: 'However, SWFs will have to look to both the indirect investment market and the debt market to fully meet their objectives in the real estate sector. It is also very possible that we will see outright acquisitions of property companies – listed and unlisted – as a way of assembling a significant direct real estate portfolio rapidly as well as acquiring the property management infrastructure to go with it.'"
read more: CBRE Press Release
12/12/2008
The Guardians of New Zealand Superannuation today announced that they were excluding from the New Zealand Superannuation Fund companies associated with the manufacture of cluster munitions and the manufacture or testing of nuclear explosive devices.
The Fund will divest from stocks in six companies involved in the manufacture of cluster munitions, one of which is also involved in the simulated testing of nuclear explosive devices. The Fund will divest from another company involved in simulated testing. The Fund does not, and has never, held shares in any company that manufactures nuclear explosive devices. The total value of the Fund's shares in these companies is approximately $37 million, or 0.3 percent of the Fund's portfolio. The table at the end of this document provides the full list of companies involved.
"Today's announcement follows the New Zealand Government joining with 93 other nations in signing an international treaty banning the production or use of cluster munitions, and a comprehensive review of the nuclear weapons issue. We will continue to review our portfolio through our specialist screening agencies to ensure our list of excluded companies remains up-to-date," said Guardians Chief Executive Officer Adrian Orr.
read more: New Zealand Superannuation Fund
12/12/2008
Terengganu is a sultanate and constitutive state of Malaysia. The New Straits Times reports that, "Terengganu is setting up a RM10 billion sovereign wealth fund to ensure its growth after its oil and gas resources are depleted. Called the Terengganu Investment Authority (TIA), the idea for the fund was mooted by Yang di-Pertuan Agong Tuanku Mizan Zainal Abidin and presented to the state and Federal Governments recently. Tuanku Mizan, who is the sultan of Terengganu, said the state must plan for its future economic growth. The king also said the state's wealth must be managed prudently and professionally so that its prosperity could be safeguarded. Yesterday, the state executive council endorsed the setting up of the TIA with Tuanku Mizan as chairman of the board of advisers. Other board members will be professionals. The TIA will operate as a sovereign wealth fund that invests and delivers long-term economic benefits and returns to its investors and Malaysia. It aims to initially raise up to RM10 billion that will be invested in Terengganu and the country. It will also have the mandate to invest globally and hopes to bring international partners to the state. The RM10 billion will be sourced from local and foreign capital markets with a proposal for the Federal Government to provide a government guarantee of up to RM5 billion and for the TIA to be declared a tax-exempt company. The funds will be secured against a portion of the state's oil revenues."
read more: New Straits Times
12/9/2008
Bloomberg reports that, "Korea Investment Corp. said it still has faith in Merrill Lynch & Co. Chief Executive Officer John Thain after a stock rout that cut the value of its stake by $800 million and forced the firm's sale to Bank of America Corp.
'He was willing to change the company and Merrill needed a change,' Guan Ong, the $30 billion sovereign fund's chief investment officer, said yesterday in an interview in Seoul. 'We made the right decision because we believe in John Thain.'
Merrill's fifth-biggest shareholder joined Temasek Holdings Pte in endorsing Thain, who presided over 3,500 job cuts and engineered the firm's sale to Bank of America after replacing the ousted Stan O'Neal a year ago. The 53-year-old agreed to forgo a year-end bonus after the financial-market meltdown and bank bailouts stirred a public outcry over Wall Street pay."
read more: Bloomberg
12/8/2008
"SUNNYVALE, Calif. -- December 8, 2008 --AMD (NYSE: AMD), the Advanced Technology Investment Company (ATIC) and Mubadala Development Company today announced amendments to the October 6, 2008 transaction agreements for the creation of a leading-edge semiconductor manufacturing joint venture, currently known as The Foundry Company. The transactions covered by the amended agreements are expected to close at the beginning of 2009.
The amendments to the terms between AMD and Mubadala provide for the following:
Mubadala will purchase 58 million shares of AMD’s common stock at a revised purchase price per share equal to the lower of (i) the average closing price per share of AMD’s common stock on the NYSE during the 20 trading days immediately prior to and including December 12, 2008 or (ii) the average closing price per share of AMD’s common stock on the NYSE during the 20 trading days immediately prior to the closing date of the transaction.
AMD will issue to Mubadala an additional 5 million warrants to purchase AMD stock, for a total of 35 million warrants.
The amendments to the terms between AMD and ATIC provide for the following:
The enterprise value of the manufacturing assets to be contributed by AMD to The Foundry Company will be reduced from a multiplier of 1.13x to 0.85x of the net book value of the assets. As a result, AMD will own approximately 34.2 percent and ATIC will own approximately 65.8 percent of “The Foundry Company’s” fully-converted common stock. AMD and ATIC will each have equal voting rights at the close of the transaction.
The net asset valuation multiple on future capital calls of The Foundry Company will be reduced from 1.1x to 0.9x.
All other material economic terms of the transaction agreements remain unchanged. ATIC will still invest $2.1 billion to purchase its stake in “The Foundry Company”, of which it will invest $1.4 billion directly in the new entity and will pay $700 million to AMD."
read more: AMD Corporate Site
12/8/2008
McLaren expect their revenues to fall by more than a third as a result of the global economic crisis, according to the Formula One team's boss and co-owner Ron Dennis. "Our budgets come from the advertising budgets of the companies that support us, and inevitably advertising budgets get slashed or, at least are significantly trimmed in times of economic strife," he told the Observer.
"We know we have to reduce our costs to cater for the inevitable downturn in income that is coming in 2010 and 2011," he added in an interview that the Sunday paper said took place before Honda announced on Friday that they were pulling out of the sport."We predict that our turnover will drop from 280 million pounds a year to as low as 175 million pounds a year," said Dennis. McLaren are 40 percent owned by Mercedes with 30 percent in the hands of Bahrain's state-owned Mumtalakat holding company and the remainder shared equally between Dennis and Saudi business partner Mansour Ojjeh.
read more: Reuters UK
12/6/2008
Kazakh national oil and gas company KazMunayGas (KMG), ConocoPhillips and Energy & Industry Holding Co., a wholly owned subsidiary of UAE-based Mubadala Development Company, signed an agreement in Almaty on Friday on the principles of cooperation on the Block N shelf project.
The parties agreed that the project will be managed by a joint operating company, in which KMG will own 51% and the other two companies will own the remaining 49%. During the production period, KMG will be the sole owner of the operating company.
"In accordance with this agreement, KazMunayGas will transfer 24.5% stakes in the contract for the subsurface use to each ConocoPhillips and Mubadala," KMG President Kairgeldi Kabyldin told Interfax following the signing ceremony.
"This field has some 630 million tonnes of geological resources with recoverable resources estimated at about 270 million tonnes. Under the agreement, our foreign partners will pay a signing bonus of $100 million," he said.
read more: iStockAnalyst
12/5/2008
FT reports that, "British Land has reignited talks to sell a large stake in its flagship £1.4bn ($2.3bn) Meadowhall shopping centre in the north of England. A London-listed property fund, backed by an Abu Dhabi sovereign wealth fund, is seen as frontrunner to secure the deal. The shopping centre in Sheffield, South Yorkshire, comprises almost a tenth of British Land's property portfolio. Meadowhall was valued at £1.4bn at the end of September according to the UK property company's most recent set of accounts, representing a net equivalent yield of 5.7 per cent. British Land is in talks to sell about half of the shopping centre to London & Stamford, a listed property opportunity fund launched at the start of the year by investors Raymond Mould and Patrick Vaughan.
London & Stamford has set up Cavendish, a joint venture with an unnamed Abu Dhabi sovereign wealth fund, to co-invest in sizeable transactions, and the majority of the equity would likely be sourced from the Middle East if a deal were to go ahead. There is competition from other interested buyers, however, with US opportunity fund Carlyle among several that are understood to have tabled offers should the deal not be taken forward with London & Stamford."
read more: FT
12/4/2008
Reuters reports that, "China Investment Corporation, the sovereign wealth fund that has incurred steep paper losses on its stakes in U.S. financial firms, said on Wednesday it is "not brave enough" to invest in foreign financial firms and lacks confidence in the shifting U.S. financial regulatory situation.
'It's changing every week. How can I be confident?,' Lou Jiwei, chairman of CIC, said during the Clinton Global Initiative event in Hong Kong, referring to U.S. government efforts to rescue the devastated financial services sector. He said the fund continued to make investments overseas, and was looking to diversify geographically to include emerging economies. 'We are still actively making investments outside, and we will continue our investments,' he said during a panel discussion. Lou made his remarks just ahead of talks scheduled in Beijing between U.S. Treasury Secretary Henry Paulson and Chinese officials in the fifth round of a so-called strategic economic dialogue that Paulson initiated in 2006. Lou said the world should not look to China to resolve the financial crisis."
read more: Reuters
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