05.15.08
This week marks the end of the 6th month moratorium for the Qatar Investment Authority to bid again on Sainsbury’s PLC, the British supermarket chain. Last summer and fall, the QIA attempted to take over Sainsbury for roughly $20 billion, with a £6 per share offer. Currently the Sainsbury’s shares are trading at £3.76 (May 15). See our report on the attempted takeover.
In my mind, it’s not if QIA makes another bid but when. Sainsbury’s is still a very attractive company for the QIA. While Sainsbury’s does have minor problems here and there, it is obviously doing something right with profits increasing 28% last quarter alone. The bid was recalled last fall because the QIA could not find the cash. Since the QIA does not leverage assets, they simply could not find a suitable loan due to the credit crunch that was rearing its ugly head in the fall of 2007. The QIA might need to increase its stake in Sainsbury’s before attempting another bid. Last time, it was able to secure enough support from the various investors to approve that takeover. But this time, there’s a good chance that Robert Tchenguiz, the property investor, might not approve the bid since he was severely hurt by the failed bid and relations between Paul Taylor, who led the QIA bid and was a former employee of Tchenguiz, were soured. However, Tchenguiz might want to recoup some of his money.
When the history of SWFs is written, the bid will be the turning point that brought the secretive world of SWFs into the limelight. Before the bid, the term Sovereign Wealth Funds was basically unknown except for a few people in the financial sector and academia. This bid made SWFs known in the UK and also the rest of the world.
05.08.08
Amadan International is currently seeking summer interns from across the world. Interns will join the Research Department and work with senior researchers on various projects for clients or for general use within the Research Department. Amadan International has been involved in projects spanning the globe in political, financial, and social research.
Interns will focus extensively on researching and writing. This will provide a great opportunity to develop your research skills in a fast paced environment.
This position is quite flexible in terms of days and times of work, and is remotely based. However, projects must be submitted on time.
QUALIFICATIONS
An ideal candidate will:
- have excellent analytical and writing skills
- have previous research experience
- be creative, organized and responsible
- be flexible and comfortable multi-tasking as well as working independently and as part of a team
- be willing to commit a minimum of 20 hours a week (days and times are flexible)
- must have a personal computer with internet connection
There is a monthly stipend, depending on experience. This will be discussed during the interview process.
Interested candidates should send a resume, two references, writing sample, and letter of interest by email to internship@amadaninternational.com
Amadan International is an equal opportunity employer that considers applicants for all positions without regard to race, color, religion, creed, gender, national origin, age, disability, marital or veteran status, sexual orientation, or any legally protected status. Citizens from all countries are welcome to apply for this position.
05.05.08
The Qatar Investment Authority has announced that it has created a new investment fund, PME Infrastructure Management Limited Fund, to invest in African transportation, communication and energy sectors. This fund was announced on the eve of a trip by South African President Thabo Mbeki to Qatar. This fund will have $400 million and be listed on the London Securities Market. This is considered to be the first investment by the QIA in South Africa. According to the Government of Qatar, the fund gives priority to investments in South Africa, as it is the most suitable country to invest in compared to other African countries. This investment follows the trend by the QIA to create investment funds that focus on specific countries or regions, including its most recent fund focusing on Vietnam.
My first thought is that this fund is probably going to start a trend of Sovereign Wealth Funds investing in Africa. Sovereign Wealth Funds are always looking at each other to see what other SWFs are doing and for the most part, they try to do the same (for more details on investments, see Investments in the Financial Sector). Our recent report on SWF investments in Africa found only a few so far but we noted that SWFs will be increasing their investments starting this year. There are heavy rumors out there that some SWFs are targeting several African companies including financial banks. So I wouldn’t be surprised if Abu Dhabi Investment Authority, Temasek Holding , Government of Singapore Investment Corporation, and Qatar Investment Authority start making more investments in Africa within the next few months. I can easily see that investments in Africa will top $5 billion during this year and possibly go over $10 billion.
04.21.08
Since the State Administration of Foreign Exchange (SAFE) took a stake in BP and Total, many articles have called SAFE a Sovereign Wealth Fund. But is it a mistake? Well, no, but technically calling the China Investment Corporation a Sovereign Wealth Fund is a mistake. The CIC was created using a bond sale, not from a commodity, or foreign reserves. It was created using borrowed money. SAFE is actual using foreign reserves to make investments. But this is a discussion for another day on the topic of what exactly a SWF is (Short Answer: Just about everyone is wrong; including us).
After the initial investments made in January by SAFE, we thought that this was just a shot across the brow of CIC and this little power play would slowly fade away. But there’s no denying that SAFE isn’t going away. As a result, we have decided that SAFE will continue to make investments and act like a SWF, so we should include it in our list of Sovereign Wealth Funds ( the map version). Current subscribers are able to access our article about SAFE here.
We believe that SAFE has roughly around $15 billion currently but does have access to just over $1.5 trillion.The investments made by SAFE are done though its Hong Kong based subsidiary, SAFE Investment Company. We have just started our research on possible investments made by SAFE but so far it’s: BG Group, Australia and New Zealand Bank, Commonwealth Bank of Australia, National Australia Bank, Total, and British Petroleum.
04.14.08
The UK Telegraph is reporting tonight that a China SWF has bought more then 1% into BP. It says that the China Investment Corporation made the investment but that is very unlikely, in fact, impossible. It is the State Administration of Foreign Exchange, which is not a Sovereign Wealth Fund, that made this investment, if it actually occurred. Last week, SAFE bought into Total. Like I said last week, this would be another troubling development.
I’m not sure how often the CIC must say that they will not be investing in any natural resource companies and this includes mining and oil companines.
04.09.08
There’s two points I want to make today on the structure of Sovereign Wealth Funds’ investments and total assets.
There’s been a fair amount of chatter around the internet on the topic of cash and SWFs. Many have asked the question, why haven’t the SWFs invested more in the financial sector ($50 billion isn’t enough?). No investment fund keeps a large amount of cash on hand. I’ve stressed this before and I’ll stress it again, SWFs are really not that different from other investment funds (just a bit bigger though). It appears that when SWFs receive money, the amount goes immediately into bonds. Bonds are then sold to finance investments. Some SWFs have even taken out loans to finance investments. Looking at the size of these funds (or see the map version), we are about 95% confident that the amounts we list are correct. We are still working on the Government of Singapore Investment Corporation. Since we are on the topic of total assets, another paper we are currently working on is regarding the future of SWFs and the amount of assets they will have in a few years. The estimate of 12 trillion by 2015 is not only wrong, but completely unjustified.
Reuters has a story today on SWF investments in developing countries. The basic point is saying that SWFs are moving away from developed countries to developing countries. Besides the fact that this story has no actual data to suggest that this is case, the story is about five years late. Yes, of course SWFs are investing in developing nations and will continue to increase their investments but this does not mean that they find the developed markets lacking- it’s because many developing nations are doing quite well and are growing by large margins. The vast majority, plus 90%, of assets that SWFs hold are in developed countries or their local economy. Some, such as Temasek Holdings, do invest heavily in non-developed countries, but the actual cash amount of these investments is rather low. Our Executive members are able to read our latest report on SWF investments in Africa. There have not really been any major deals this year in developing countries. It appears the biggest investment is the $1 billion dollars by the Qatar Investment Authority into the newly created Vietnam fund. A quick look at our data and it appears that total investments made by SWFs in developing countries this year are less than $4 billion compared to over $40 billion in developed countries.
04.04.08
We have a new feature on Sovereign Wealth Funds. This map lists all SWFs with assets over $1 billion and when they were created. We also map possible SWFs that might be created in the near future.
Emirates Investment Authority is the planned Sovereign Wealth Fund for the entire United Arab Emirates. It was formed in November 2007 and held its first board of directors meeting last week. Not too much is known about this new fund. It has the potential to combine all of the SWFs and other investment vehicles in the UAE. While this is unlikely to occur for a while, this would not be out of line as the various emirates that make up the UAE are increasingly working together.
Our estimates for this fund are in the range of $10 billion to $20 billion.
Sheikh Mansour Bin Zayed Al Nahyan, Minister of Presidential Affairs, as Chairman of the authority.
Mohammad Abdullah Al Gergawi, Minister of State for Cabinet Affairs, as Deputy Chairman.
Board Members
Soud Ba’alawy, Chairman of the Dubai Group, on his official biography also claims to be on the board but we cannot confirm that.
Our Executive package members can access a report on the EIA.
According to a Norges Bank Press Release, the Government Pension Fund of Norway is proposing to raise its cap to owning up to 15% percent in individual companies. Currently it is just 5%. They are proposing to allow investments in pre-listed companies or during their IPO. The second proposal makes sense but the first one is rather interesting. Looking at the GPF’s holdings from last year, they only control more than 4% of 6 companies. This is out of a total of 7,000 investments, so raising it from 5% to 15% seems a bit extreme in this case. Perhaps they’re planning to make a particularly large investment soon?
Yesterday, I joked that China might have created another Sovereign Wealth Fund- well it might have actually happened. According to some press accounts, the Chinese government owned investment fund that bought 1.5% of Total isn’t the China Investment Corporation, but rather China’s State Administration of Foreign Exchange (SAFE). This is a very worrying development for the CIC. As we spelled out in our report about the creation of the CIC, the People’s Bank of China, which controls SAFE, has long been against the CIC, which the Ministry of Finance (MoF) supports. The PBoC wanted to use SAFE as its SWF, rather than creating another separate fund. There has been a series of power plays between PBoC and the MoF. To sum it up, during the summer of last year, SAFE bought a .46% stake in BG Group, a British natural gas company. It was assumed at the time that SAFE bought the stake for the CIC, but there’s no evidence to suggest that the stake was given to the CIC. It appears that this was the first investment shot that PBoC did. This was followed up in December when SAFE invested into three Australian Banks. Now, we have this investment in Total, which brings up many questions and very serious problems not only for the CIC but also for all the government financial bodies.
The CIC, rightly or wrongly, has recognized the sensitivity of issues of transparency and possible political ramifications of investments. Lou Jiwei and his team have done a fair amount of things that they hope, and has to an extent, brought openness and transparency to the CIC. This investment by SAFE and continued investments by them, will destroy any goodwill towards the Chinese’s government investments. SAFE is probably one of the most secretive government financial organizations in the world. Compared to the CIC, which I do believe has been quite open for an SWF, SAFE is a terrible organization to use for investments. As far as we can tell, SAFE doesn’t have the authority to take stakes such as this and if it does, the question must be asked, why did they create the CIC? The worst thing about this thing is that China might not have control over SAFE. The council has been quite supportive of the CIC and if they can’t order the PBoC to tell SAFE not to make these investments it is quite worrying indeed.
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