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Effects of U.S. Currency Depreciation on Sovereign Wealth Funds

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As the U.S. dollar declines relative to other currencies, many sovereign wealth funds are finding U.S. companies rather inexpensive. Already many sovereign funds, such as the China Investment Corporation (CIC), have taken significant stakes in U.S. brand name financial institutions like Morgan Stanley, while other sovereign funds have invested in technology firms like Advanced Micro Devices Inc (Mubadala Development Company). These deals are average for the sovereign investor and many proclaim they are in these investments for the long-run.

Since many central banks with large current account surpluses are now beginning to emulate private portfolio managers; they are seeking to improve their asset allocation. Sovereign wealth funds are diversifying their portfolios into non-currencies to achieve higher returns rather than holding a depreciating U.S. currency. According to the People’s Bank of China, they had around US$1.7 trillion in foreign reserves in December 2007. This gives the CIC, a SWF to Foreign Exchange ratio of 0.12x (this leaves out SAFE and the Hong Kong Monetary Authority Investment Portfolio) which is low compared to the Abu Dhabi Investment Council’s ratio of 29.54. This ratio entails how large sovereign wealth funds are in size compared to foreign currency reserves.

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China Helps Pakistan’s Foreign Reserves

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Despite Pakistan witnessing an increase in exports, the rapid increase in crude prices and lackluster financial inflows, have affected the country’s balance of payments position. Trying to avoid a full-scale currency crisis, Pakistan is also dealing with a fiscal budget deficit and a current account deficit. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Russia-Japan Investment Fund to Back Wood Pellet Production in Russia

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The Russian Far East has a lot of timber, and for that wood pellets is a source of biofuel. A while back, the Russian Direct Investment Fund (RDIF) formed the Russia-Japan Investment Fund (RJIF) with the Japan Bank for International Cooperation (JBIC). RDIF and JBICIG Partners as part of RJIF, together with RFP Group and Japan’s Prospect Co., Ltd. have agreed to collaborate and consider potential investments in Russia’s biofuel industry. JBICIG Partners is a subsidiary of the Japan Bank for International Cooperation.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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RDIF Lures Asian Investors Toward Russian Surgical Robot Project

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The Russian Direct Investment Fund (RDIF) is partnering with a number of unnamed Asian co-investors to allocate capital toward a project to create and manufacture Russian surgical robots. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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