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Sovereign Wealth Management’ Session

Bill Miracky, a senior partner at the Monitor Group, began by concisely defining a sovereign wealth fund (“SWF”) as a government-owned investment fund, managed separately from the sovereign treasury, that invests across a range of asset classes.

The rapid rise of SWFs -they invested $92 billion in equity transactions in 2007, up from just $3 billion in 2000 – has ignited widespread controversy, as many criticize their alleged political motives and lack of transparency. Miracky dismissed these risks: “The hype around these funds is overblown.there’s much more evidence to argue that they are a force for good.” The panel’s other speakers, both of whom have served in senior roles at SWFs, supported Miracky’s point of view by cataloguing and refuting the most common criticisms leveled at their institutions. Manish Kejriwal of Temasek Holdings, which owns and manages the Singapore government’s direct investments, noted that his institution is subject to the same laws and disclosure requirements as any Singaporean company. Knut Kjaer, the former CEO of Norway’s SWF, pointed out that his fund invests with the explicit objective of optimizing its economic risk-reward ratio; it has no political motives. “I have never received any input from the government on what to invest in,” he said.

GOOD: Miracky, who has studied this topic extensively, presented an excellent primer on the meteoric rise of SWFs. Kejriwal and Kjaer provided a fascinating glimpse into the workings of an SWF and a convincing explanation of why their funds are, indeed, “forces for good.”

BAD: The Q&A portion of the session largely revolved around Russia and non-democratic nations such as China and the Gulf states; there seemed to be a lingering concern among audience members that the growing wealth concentrated in these nations’ SWFs may pose a geopolitical threat to the rest of the world. Unfortunately, the speakers were mostly unable to provide insight on this subject because, as they acknowledged, these SWFs are not nearly as transparent as those of Norway or Singapore.

October 20, 2008
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