IFR Sovereign Wealth Funds Volume 2

Part 1: Protectionist actions taken by recipient countries: a key issue of concern for sovereign wealth funds
- Interview with Dr Eliot Kalter, The Fletcher School, Tufts University
Part 2: SWFs in their own words at the Baku Summit
- By Natsuko Waki
The coming of age for SWFs
Challenges for the IFSWF
Finding the right balance of transparency in China
Norway’s perspective on the systemic role of SWFs
New Zealand’s perspective on its future and that of the Santiago Principles
Chile’s evolving investment strategy – risk with responsibility

Chapter 04 The macroeconomic scenarios SWFs will face

Crisis phase
Post-crisis phase
Scenario 1: Global rebalancing
- Implications for SWFs
Scenario 2: Anaemic recovery
- Implications for SWFs
Scenario 3: Status quo ante
- Implications for SWFs

Chapter 05 Size, stocks and flows

SWFs survive the crisis with new funds emerging

Chapter 06 SWF performance in the wake of the crisis

Examples of the scale of losses suffered
SWF past performance factors
Worldwide stock markets
Domestic stock markets
Financial institutions
Exit strategies
Asset allocation
Bonds
Alternative investments
Current fund positions
Examples of announced SWF activities in alternative investments
Conclusion

Chapter 07 Strategies and portfolio issues

Strategies
Coping strategies
Emerging intensive inter-fund co-operation
Outsourcing
- Funds’ in-house management
Leverage
Portfolio diversification and risk management
Portfolio issues
Cash and cash equivalents
Fixed income
Equities – reason for losses, driver of rebound gains
- Sectors – this season’s favourites
- Commodities and energy
China and its commodities and industrial assets appetite
Alternative investments are on the rise
- Private equity and hedge funds
- Real estate
- Emerging markets
- Currencies
Conclusions

Chapter 08 SWF equity investments – back on track after the crisis

Description of the data
The dynamics of SWF equity investment activity
Sectoral distribution of equity investments
Geographic distribution of SWF acquisitions
Conclusions

Chapter 09 Sovereign wealth funds go home: the rise of national wealth funds

Defining NWFs
The essential dynamic tension of NWFs
Special uses of SWFs as NWFs
Approaches to supporting the domestic economy
Budget support
Loans and guarantees to banks and businesses
Direct stakes in companies
Conclusion
The opportunity for outsourcing
- Continued one-off interventions
- More countries starting NWFs
- SWFs building NWF skills

Chapter 10 Conclusions

APPENDIX

Select Sovereign Wealth Funds

UAE – a mapping of SWFs and quasi-SWFs
Abu Dhabi
- ADIA
- Abu Dhabi Investment Council (ADIC)
- Mubadala Development Company
- International Petroleum Investment Corporation (IPIC)
- Invest AD – formerly Abu Dhabi Investment Company (ADIC)
Dubai
- Investment Corporation of Dubai
- Dubai World
- Dubai Holding
Korea Investment Corporation
Canada Alberta Heritage Savings Trust Fund
Canada Pension Plan Investment Board
State Oil Fund of the Republic of Azerbaijan
Petroleum Fund of Timor Leste

LIST OF TABLES AND FIGURES

Table 5.1: SWFs – size of industry as a whole and of individual SWFs, end-2007, end-2008, Q1/Q2 2009
Table 7.1: Barclays fixed income indices and FTSE equity indices, % change in value
Table 7.2: Oil price forecasts
Table 7.3: Private equity investments by SWFs, 2007 and 2008
Table 8.1: Main SWF investments in financial institutions, Q1 2007–Q3 2009 (US$m)
Table 8.2: List of funds covered in the Thomson Reuters SWF transaction database
Table 9.1: Differences between state-owned holdings
Table A1: KIC key data
Table A2: Canada Alberta HSTF key data
Table A3: CPP Investment Board key data
Table A4: SOFAZ key data
Table A5: Petroleum Fund of Timor Leste key data

Figure 2.1: Current account balance in selected regions and countries, 1997–2008, 2009–14F (US$bn)
Figure 4.1: GDP growth – real and contribution of different country groups, 1970–2014 (%)
Figure 4.2: Schematic evolution of expectations and growth under the global rebalancing scenario
Figure 4.3: Schematic evolution of growth and expectations under the anaemic recovery scenario
Figure 4.4: Schematic evolution of growth and expectations under the status quo ante scenario
Figure 5.1: SWF assets compared to other investor classes, 2007, 2008, Q1/Q2 2009 (US$bn)
Figure 5.2: Change of SWFs’ assets by analytical groups, end-2007, end-2008 and Q1/Q2 2009 (US$bn)
Figure 5.3: Change of SWF aggregate AUM, end-2007, end-2008, Q1/Q2 2009 (US$bn)
Figure 6.1: Investment return of selected funds for 2008
Figure 6.2: Sovereign equity deals over time (US$m)
Figure 6.3: SWF investments in 2009 – sectoral allocation (%)
Figure 7.1: FTSE aggregate regional equity indices, Jun 2008–Aug 2009
Figure 7.2: Publicly reported SWF transactions since 2000 by number and value
Figure 7.3: Top foreign holders of US Treasury Securities, May 2008–May 2009, end of period (US$bn)
Figure 7.4: Portfolio composition of selected funds, FY2008 unless otherwise stated, and investment return for 2008 (%)
Figure 7.5: Aggregate portfolio composition of selected SWFs, FY2007, FY2008 and Q1 or Q2 2009 (%)
Figure 7.6: Share of cash and cash equivalents in selected funds’ portfolios, 2008 (%)
Figure 7.7: Share of fixed income instruments in selected funds’ portfolios (%)
Figure 7.8: Chile PRF & SESF portfolio composition, 2007, 2008 (% of total)
Figure 7.9: SOFAZ fixed income holdings, end-2007, end-2008 (% of total)
Figure 7.10: Share of equity investments in selected funds’ portfolios (%)
Figure 7.11: Change in equity holdings in selected funds' portfolios (% of total)
Figure 7.12: Share of alternative assets in selected funds’ portfolios, FY2008 (%)
Figure 7.13: Share of real estate, PE, HFs and commodities in selected funds’ portfolios (% of total)
Figure 7.14: Real effective exchange rates of major currencies, Jan 2006–2009 YTD
Figure 8.1: Evolution of SWF equity deals, including seller and target transactions, 2000–09 Q1–Q3 (US$bn)
Figure 8.2: SWF role in the transactions, 2000–09 (US$bn)
Figure 8.3: Number of equity acquisition deals (with non-missing values only) and total value, 2000–Q32009 (US$bn)
Figure 8.4: FTSE aggregate regional indices, Jan 2007–Aug 2009 (Aug 2006=1)
Figure 8.5: Quarterly SWF equity investments, Q1 2007–Q3 2009 (US$bn)
Figure 8.6: Financial versus non-financial deals (US$bn)
Figure 8.7: Sectoral breakdown of SWF equity investments, H1 2006–Q3 2009 (US$bn)
Figure 8.8: SWF equity investments by geographical region, Q1 2006–Q3 2009 (US$bn)
Figure 8.9: SWFs’ domestic vs. international deals, H1 2006–Q3 2009 (US$bn)
Figure A1: Mapping of UAE SWFs and quasi-SWFs
Figure A2: KIC portfolio composition – assets at end-2008 (%)
Figure A3: Canada Alberta HSTF – shift in portfolio composition, 31/12/2007, 31/12/2008, 31/03/2009 (%)
Figure A4: Canada Alberta HSTF – return on investments by market value (%)
Figure A5: CPP Investment Board – asset targets, 31 Mar 2009 (%)
Figure A6: CPP Investment Board – asset mix, 31 Mar 2009 (%)
Figure A7: CPP Investment Board – private equity investments by sector, 31 Mar 2009 (%)
Figure A8: Azerbaijan’s oil production and revenues projection
Figure A9: SOFAZ portfolio composition: assets composition, 2008 (%)
Figure A10: Timor Leste oil production and revenues projection
Figure A11: Petroleum Fund of Timor Leste – balance by scenarios (US$bn, 2009 prices)

Reports

IFR Sovereign Wealth Funds Volume 2

Table of Contents

Executive summary

Chapter 01 Introduction

Chapter 02 Macroeconomic context and evolution of the SWF industry

Chapter 03 Expert perspectives on regulation