... and more transparent too!
<table style="width: 846px; height: 1421px;" class="georgia11 whiteBg" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="padlrt10">Feb 13, 2009</td></tr> <tr> <td class="padlrt10"> SWF losses
Not just Singapore
</td> </tr> <tr><td class="padlrt10">Few sovereign wealth funds spared in global crisis, but it's too early to pass judgment: Experts</td></tr> <tr><td class="padlrt10"> By Alvin Foo </td></tr> <tr><td class="marginbottom8 padlrt10"> TEMASEK Holdings and the Government of Singapore Investment Corporation (GIC) are not the only sovereign wealth funds (SWFs) seeing shrinking portfolios in the fallout from the worst financial storm since the 1930s.
The Kuwait Investment Authority (KIA) said on Tuesday it had lost US$30.73 billion (S$46.38 billion) from March to December last year. The Council on Foreign Relations, an independent New York-based organisation, estimated that the KIA's portfolio shrank from US$262 billion in December 2007 to US$228 billion a year later.
Earlier this week, it was revealed in Parliament that Temasek's net portfolio value dropped 31 per cent between March 31 and Nov 30 last year, from $185 billion to $127 billion. The value of GIC's investments also declined last year but the numbers were not disclosed.
Even the world's largest SWF - the Abu Dhabi Investment Authority - has not been spared and may have lost US$125 billion last year, according to a Council on Foreign Relations report. The report said its portfolio of assets is estimated at US$328 billion.
Gulf-region SWFs could lose as much as US$450 billion this year due to the global crisis - equal to the region's oil income for an entire year - according to remarks made by Mr Henry Azzam, Deutsche Bank's chief executive for the Middle East and North Africa, to CNBC Arabiya.
Norway's Government Pension Fund - the third-biggest SWF - has had the worst quarter in its 18-year history, losing 14.5 per cent of its value in the three months to Sept 30 last year. The fund has assets of about US$300 billion. These figures do not take into account steep market falls in October and November. It took a US$500 million hit last year after sinking US$1 billion into refinancing six European and American banks, including Lehman Brothers.
Fund managers and analysts told The Straits Times this amount of red ink in SWF portfolios was hardly surprising, given the bear market. Aberdeen Asset Management managing director Hugh Young said: 'As long as you had invested in equities, losses are completely unavoidable.'
Mr David Lee, managing director of Ferrell Asset Management, said even university endowment funds from Yale and Harvard, 'known to be the best asset allocators around', suffered losses. He added: 'SWFs are mostly long-term funds, so we shouldn't be looking at two-year returns. Given these extraordinary times, as long as you beat the benchmark, your job is done.'
Other fund managers said it was hard to determine how well SWFs had performed due to insufficient information. Norway's Government Pension Fund and Temasek are among funds that have been more transparent about their holdings and performance. Mr Wong Kok Hoi, APS Asset Management's chief investment officer, said: 'Most of them don't disclose their policy asset allocation mix, so it's hard to quantify how well they did.'
But what has caused the most controversy has been the mega investments made by SWFs in troubled financial institutions.
According to California-based Sovereign Wealth Fund Institute, SWFs spent US$44.9 billion buying stakes in US and European banks from March 2007 to April last year. Mr Lee said: 'Nobody has correctly predicted it would be so severe and so rapid, so you can't say in hindsight they should have done this or that.'
Some analysts felt SWFs should have taken precautions as risks were evident. 'They (Norway's SWF) should have been more cautious,' said Mr Harald Magnus Andreassen, chief economist at Oslo-based First Securities ASA. He told Bloomberg: 'Although nobody talked about a meltdown, the risk was obvious.'
Washington-based Edwin Truman, senior fellow at the Peterson Institute for International Economics, agreed: 'Some SWFs felt a year ago that the worst was over, and that investing in blue-chip financial institutions would be a way to ride the recovery. They were all wrong, like everybody else who made the same judgment.'
But others feel it is too early to judge. Mr Wong said: 'Most investments should be given a period of three to five years to gauge their performance; it's too short to pass judgment in one or two years.'
Some SWFs are already choosing to stay away from the tottering banks.
Mr Lou Jiwei, chairman and chief executive of the US$200 billion China Investment Corp, said last December: 'Right now we do not have the courage to invest in financial institutions because we do not know what problems they may have.'
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<table style="width: 846px; height: 1421px;" class="georgia11 whiteBg" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="padlrt10">Feb 13, 2009</td></tr> <tr> <td class="padlrt10"> SWF losses
Not just Singapore
</td> </tr> <tr><td class="padlrt10">Few sovereign wealth funds spared in global crisis, but it's too early to pass judgment: Experts</td></tr> <tr><td class="padlrt10"> By Alvin Foo </td></tr> <tr><td class="marginbottom8 padlrt10"> TEMASEK Holdings and the Government of Singapore Investment Corporation (GIC) are not the only sovereign wealth funds (SWFs) seeing shrinking portfolios in the fallout from the worst financial storm since the 1930s.
The Kuwait Investment Authority (KIA) said on Tuesday it had lost US$30.73 billion (S$46.38 billion) from March to December last year. The Council on Foreign Relations, an independent New York-based organisation, estimated that the KIA's portfolio shrank from US$262 billion in December 2007 to US$228 billion a year later.
Earlier this week, it was revealed in Parliament that Temasek's net portfolio value dropped 31 per cent between March 31 and Nov 30 last year, from $185 billion to $127 billion. The value of GIC's investments also declined last year but the numbers were not disclosed.
Even the world's largest SWF - the Abu Dhabi Investment Authority - has not been spared and may have lost US$125 billion last year, according to a Council on Foreign Relations report. The report said its portfolio of assets is estimated at US$328 billion.
Gulf-region SWFs could lose as much as US$450 billion this year due to the global crisis - equal to the region's oil income for an entire year - according to remarks made by Mr Henry Azzam, Deutsche Bank's chief executive for the Middle East and North Africa, to CNBC Arabiya.
Norway's Government Pension Fund - the third-biggest SWF - has had the worst quarter in its 18-year history, losing 14.5 per cent of its value in the three months to Sept 30 last year. The fund has assets of about US$300 billion. These figures do not take into account steep market falls in October and November. It took a US$500 million hit last year after sinking US$1 billion into refinancing six European and American banks, including Lehman Brothers.
Fund managers and analysts told The Straits Times this amount of red ink in SWF portfolios was hardly surprising, given the bear market. Aberdeen Asset Management managing director Hugh Young said: 'As long as you had invested in equities, losses are completely unavoidable.'
Mr David Lee, managing director of Ferrell Asset Management, said even university endowment funds from Yale and Harvard, 'known to be the best asset allocators around', suffered losses. He added: 'SWFs are mostly long-term funds, so we shouldn't be looking at two-year returns. Given these extraordinary times, as long as you beat the benchmark, your job is done.'
Other fund managers said it was hard to determine how well SWFs had performed due to insufficient information. Norway's Government Pension Fund and Temasek are among funds that have been more transparent about their holdings and performance. Mr Wong Kok Hoi, APS Asset Management's chief investment officer, said: 'Most of them don't disclose their policy asset allocation mix, so it's hard to quantify how well they did.'
But what has caused the most controversy has been the mega investments made by SWFs in troubled financial institutions.
According to California-based Sovereign Wealth Fund Institute, SWFs spent US$44.9 billion buying stakes in US and European banks from March 2007 to April last year. Mr Lee said: 'Nobody has correctly predicted it would be so severe and so rapid, so you can't say in hindsight they should have done this or that.'
Some analysts felt SWFs should have taken precautions as risks were evident. 'They (Norway's SWF) should have been more cautious,' said Mr Harald Magnus Andreassen, chief economist at Oslo-based First Securities ASA. He told Bloomberg: 'Although nobody talked about a meltdown, the risk was obvious.'
Washington-based Edwin Truman, senior fellow at the Peterson Institute for International Economics, agreed: 'Some SWFs felt a year ago that the worst was over, and that investing in blue-chip financial institutions would be a way to ride the recovery. They were all wrong, like everybody else who made the same judgment.'
But others feel it is too early to judge. Mr Wong said: 'Most investments should be given a period of three to five years to gauge their performance; it's too short to pass judgment in one or two years.'
Some SWFs are already choosing to stay away from the tottering banks.
Mr Lou Jiwei, chairman and chief executive of the US$200 billion China Investment Corp, said last December: 'Right now we do not have the courage to invest in financial institutions because we do not know what problems they may have.'
[email protected]
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