Transcript Slide 1

A Sovereign Wealth Fund (SWF) is a state-owned investment fund composed
of financial assets such as stocks, bonds, real estate, or other financial
instruments funded by foreign exchange assets.
Funds may have their origin in:
 Commodities - Created through commodity exports, either taxed or
owned by the government.
 Non Commodities - Usually created through transfers of assets from
official foreign exchange reserves.
Types of Sovereign Investments Vehicles:
Sovereign Wealth Funds (SWFs):
Example Qatar Investment Authority
Public Pension Schemes - example CalPERS
State-Owned Enterprises - example Chinalco
Sovereign Wealth Enterprises (SWEs) - example St Martins Property
Sovereign Wealth Enterprise (SWE)
Another interesting trend is the development of sovereign wealth enterprises which
are investment vehicles that are owned and controlled by sovereign wealth funds.
Some Fund Objectives:
Protect & stabilize a budget or economy from volatility in revenues/exports
Diversify from non-renewable commodity exports
Earn greater returns than on foreign exchange reserves
Assist monetary authorities dissipate unwanted liquidity
Increase savings for future generations
Fund social and economical development
Sustainable long term capital growth for target countries
Political strategy
Size and Growth
Since 2005, at least 17 sovereign wealth funds have been created. As other countrie
grow their currency reserves they will seek greater returns. Their growth has also been
skyrocketed by rising commodity prices especially oil & gas, especially between the
years of 2003 - 2008.
Transparency & Protectionism
 Many SWFs are non-transparent, meaning they do not report their holdings or
strategies to the Public.
 Some experts say they are passive investments, while others fear they are a
matter of national security.
 These are causes for concern for many people, investors, and governments;
and will eventually fuel the fires of protectionism.
MUST FEAR = PROTECTIONISM?
Current Trends for 2010
10. AVOIDING STRUCTURED FIXED INCOME PRODUCTS
9. MORE INVESTING IN VIETNAM, INDONESIA, INDIA, AND CHINA
8. PASSIVE INVESTMENT (INDEX)
7. PLAYING IT SAFE WITH SOVEREIGN DEBT
6. GETTING OUT OF HEDGE FUNDS
5. HIRING MORE PRIVATE EQUITY MANAGERS, (BEST OF BREED)
4. HOLDING ON, BUT NOT BUYING REAL ESTATE PROPERTY
3. BUYING UP HIGH YIELD CORPORATE BONDS
2. RESOURCES: WATER, STEEL, AGRICULTURE, & OIL
1.
OPPORTUNISTIC MINORITY STAKE DEALS IN COMMODITY FIRMS