Today is an excellent day to look for the latest information on the subject of sovereign wealth funds. For one thing, it marks the publication of a 92-page Monitor Group report on the subject, which looks at the funds in detail, notes that their differences in many ways outweigh their similarities, and which ultimately welcomes them to the international financial scene.
There’s also an important BusinessWeek article which manages to get Abu Dhabi Investment Authority managers on the record, which is quite a feat. (Pay no attention to the fact that ADIA’s head of strategy is named Villain.) Be sure to note the asset allocation sidebar, too, it might even give you some ideas with respect to your own portfolio.
Rachel Ziemba notes that ADIA has a much deeper website now than it has had in the past, which states unequivocally that "ADIA does not seek active management of the companies it invests in".
Helmut Reisen is writing about SWFs at Vox EU, and in case you missed it last week, the FT’s John Thornhill has some interesting quotes from Gao Xiqing, the president and chief investment officer of China Investment Corporation, which – like so many things Chinese – seems to be moving in the direction that the West wants, just not as quickly as they might like.
And do you recall a little kerfuffle over a leaked Milken Institute report saying that SWFs might not be as big as everybody thought they were? Well, the report’s now out, but not with the Milken Institute’s imprimatur. The author, Christopher Balding, has left Milken, and posted the report under his own name.
Balding’s case for the SWFs being smaller than you think is indeed based on public ownership data, and therefore doesn’t include any money that they’ve farmed out for management to external fund managers. He writes:
Though these SWF’s invest in hedge
funds, private equity funds, or privately managed funds operated by partners which might
not require foreign registration of securities, it is doubtful that this would account for the
difference between current estimates and verified holdings. Using the most liberal
allowances for sovereign wealth fund holdings, it is difficult in accepted international
financial statistics to account for widely cited estimates of assets under management for
Abu Dhabi, Saudi Arabia, and Kuwait. Even allowing for significant measurement errors
and flawed ownership data, it is difficult to reconcile differences of such enormity.
This does seem to me to be more assertion than argument: why are these things doubtful and difficult to reconcile? I suspect that a large part of big fund mangers’ assets under management is these days made up of SWF funds. It’s much easier to outsource such things to proven professionals than it is to navigate the politics of hiring and managing such professionals yourself.