...“Setting up a Sovereign Wealth Fund: Some Policy and Operational Considerations”, Udaibir S. Das, Yinqiu Lu, Christian Mulder, and Amadou Sy, August 2009 Das, Lu, Mulder, Sy (2009) setting up a Sovereign Wealth Fund (SWF) and provides relevant recommendations for policy makers. At the outset, it says: “policymakers should optimally consider both their sovereign assets and liabilities together with their macroeconomic objectives, when setting up an SWF.” On “ What is a Sovereign Wealth Fund?” section of the paper, the authors provides the definition of SWF by stating that these Funds are created for macroeconomics purposes in order to “ to hold, manage, or administer financial assets to achieve financial objectives”. On the next section, “When to Set up an SWF?” the paper argues that there is no certain time to establish SWF by using “fiscal surpluses and accumulated foreign exchange reserves” and it is totally up to the choices of relevant countries. Nevertheless, it was highlighted in the paper that in practice actually countries establish SWF “in a more ad hoc basis”. In other words, the paper states that “Compared with a traditional investment approach, which assumes that investors perceive their assets as fungible, behavioral finance assumes that investors tend to group their assets in a number of non-fungible accounts, and make decisions differently depending on the purpose for setting up the account.” Later, under the section of “When are a Country’s Reserves...
Words: 371 - Pages: 2
...INTRODUCTION A sovereign wealth fund (SWF) is a state-owned investment fund investing in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds. SWFs are invested globally. Central banks use their foreign-exchange reserves or revenues from commodity exports to fund these investments. The three main characteristics of SWFs are 1. To maximize long-term returns using foreign exchange reserves 2. To serve the short-term "currency stabilization" 3. Liquidity management SIGNIFICANCE AND IMPORTANCE OF SOVEREIGN FUNDS OBJECTIVES OF SWFS SWFs are created from budgetary surpluses where the governments have no international debt. In countries where such liquidity is not possible, such as the nations that depend on raw material exports, the main objective for creation of SWF is for controlling high volatility of resource prices, unpredictability of extraction, and exhaustibility of resources. STABILIZATION SWFS The SWFs that are created to reduce volatility of government revenues, to counter the boom-bust cycles' adverse effect on government spending and the national economy are called Stabilization SWFs. SAVINGS SWFS These SWFs are created to build up savings for future generations. Resource curse SWFs can help avoid resource curse in resource-rich countries. Governments may be able to spend the money immediately, but risk causing the economy to overheat, e.g., in Hugo...
Words: 1231 - Pages: 5
...Angola’s mislaid billions Introduction and history Angola is one of the larger African countries located in the southwestern part of the continent. The capital city is Luanda, and official language is Portuguese. According to United States Department of State website, “Despite its extensive oil and mineral reserves and arable land suitable for large-scale production of numerous crops, Angola has some of the world's lowest social development indicators” (Angola. Country Specific Information, 2012, para. #1). Due to these massive oil reserves, it seems that Angola should flourish and become one of the most developed African countries. Sadly, most of this country’s citizens seem to be living in extreme poverty. One can only try to guess why this would be the case. After being a colony of Portugal, Angola has gone through some rough times. Armed conflict did help with gaining the independence but right after the conflict was over, and independence achieved, civil war has taken over and slowed down any potential successes. “Development was severely restricted by a 27-year civil war that broke out upon independence in 1975 and destroyed most of the country's infrastructure. Since the war ended in 2002, the economy grew at a double-digit annual rate until the global financial crisis undercut oil revenue” (Angola. Country Specific Information, 2012, para. #1). This country has had a large potential due to its oil reserves. Because Angola exports most of its oil, it could benefit...
Words: 1898 - Pages: 8
...The Rise of Emerging Markets in Mergers and Acquisitions Developing countries are gaining strength and influence T he rise in the number of mergers over the past five years has been dramatic. Unlike previous merger waves, however, companies in emerging markets are playing an increasingly important role. Indeed, while the number of majority acquisitions increased globally by 6 percent, acquisitions of established companies by emerging firms grew at an annual rate of 26 percent. Although their motives differ from traditional M&A activity, it is clear that, in the near term, emerging competitors present a potential threat to companies in developed countries. Mergers and acquisitions have become a staple of newspaper headlines. Although most M&A activity is initiated by companies in the developed world, a recent A.T. Kearney study of global M&A reveals that a paradigm shift is occurring: Beginning in 2002, deals between developing and developed countries grew at an annual rate of 19 percent— far in excess of the industry average and four times faster than deals conducted within either developing or developed countries alone (see figure 1 on page 2). While not large in absolute terms, this rate of growth indicates how rapidly the developing world is catching up in the M&A business. In fact, the study found that companies from developing countries such as China, India, Malaysia, Russia, the United Arab Emirates and South Africa are snapping up established...
Words: 3962 - Pages: 16
...Leadership challenges and strategies in post GFC world Name: insert ID no: insert Unit code and name: insert Lecturer: insert Due date:insert We move into 2014, the Chinese class of the cavalry, with the world economy in practically improved shape and advance signs of recuperation in lots major savings. Congealing apart some not surprising excitability as the Federal Reserve of US starts to cut down accessory monetary rules, market opinion has bettered (Taylor, 2011). We are experiencing good development in the US; Japan's rules appear to be bearing an impression, China's development stays rich, and Euro domain growth is demonstrating some signs of blaming up while the trusting system's constancy is bettering – though obviously I concern the wood once I say this. In issuing market savings, substantial advance has been arrived at in amending their receptivity and resiliency to commercialize fluctuations. Two chief problems lay beforehand for the global savings, and they are ace's business leadership discussed over in Sydney. G20 Finance government Ministers chaired by Australia's financial officer Joe Hockey need to accomplish development and create employment. They might well concur on a G20 development objective. Business leadership – by the B20 business leadership forum - can assist them formulate and attain their development schemes. The G20's designs to further private sector development will hopefully adjust to our aspects...
Words: 1567 - Pages: 7
...Sovereign Wealth Funds comes into spotlight 1) Introduction Sovereign Wealth Funds (SWFs) were almost unseen in the past. Due to the US subprime mortgage debacle, SWFs has been brought into the spotlight. An ever growing number of SWFs worldwide was thought to precipitate tectonic shifts in global equity and foreign exchange markets. Unlike central banks, the SWFs are more likely to invest in emerging nations rather than the developed countries. Stephen Jen, the managing director and chief currency economist at Morgan Stanley, says that the trend for SWFs to move away from sovereign debt to assets that generate higher returns, including financial, resources, tech, and infrastructure plays, is a natural outcome of the globalization financial markets that seeks to adjust existing global imbalance. Based on the diverse investment nature of SWFs, the global fund industry anticipates huge opportunities to make money off the SWFs. At the same time, SWFs are believed to have a stabilizing role in global markets, helping to resuscitate struggling financial institution. This is based on two prominent features of SWFs. One is its longer investment horizon. The other is its greater tolerance for swings in the balance sheets. Despite the optimistic point of views on SWF, potential problems regarding transparency, potential interference and its effect on currency markets have been revealed. Other challenges faced by SWF are about its conservative nature and apparent impact on capital...
Words: 562 - Pages: 3
...Dubai-United Arab Emirates Final Paper Study Abroad: December 26, 2010 – January 6, 2011 1. Over the past 20 years Dubai has transformed into a city of economic growth and focus. Unlike its neighbors, the city and the UAE as a whole, has developed into a diverse economic state that has become a center for business and tourism. Although the city was built on the oil industry, it is the city’s current model of business that has driven its economy. Many of the city’s main revenues come from tourism, real estate, and financial services. Typically overlooked, it is Dubai’s economic development strategy that has kept the city profitable and growing. Dubai’s economic development strategy has implemented many strategies that the government believes will help ensure long term stability and sustainability. One tactic the government has developed is the implementation of free zones. These free zones have been designed to contribute to Dubai’s growth and development. One main item is involved with these zones however—the legal status of the companies within these zones. These companies are treated as foreign companies operating outside the UAE. Most sales of the companies located in these zones are exported without any tax being imposed. Owning a company in a free zone allows for 100% retention of profits (Reed). The free zones in Dubai include financial centers, media centers, and technology centers. Dubai has also taken up a large investment in the real estate sector...
Words: 3033 - Pages: 13
...mean that GCC oil and gas exports would suffer hugely, Al Khater told The Peninsula yesterday. Recalling the days of oil embargo in 1973, he said the GCC economies suffered immensely then as they posted huge budget deficits. “If the US fails to lift the debt ceiling, we would be entering a phase of uncertainties and immense difficulties.” When told about a recent Washington Post report that put the GCC’s exposure to the US at $257.7bn, Al Khater said that was a very conservative estimate. “I expect the figure to be much higher.” He said if one took into consideration the assets of the sovereign wealth funds of the GCC states as a whole, it would be in hundreds of billions of dollars. And much of these assets should be based in the US and Europe. “So I don’t think the Washington Post figure reflects the actual exposure.” Talking about Qatar, Al Khater said the assets of its sovereign wealth fund alone were estimated to range between $100bn and $200bn. “Anyhow, as I said, the crisis could lead to a depressed oil market and the value of the GCC investments overall would also be...
Words: 547 - Pages: 3
...British introduced in 1955, the Central Provident Fund (CPF), a social security savings scheme as an alternative to a state pension scheme. The CPF has evolved significantly since its humble beginnings more than half a century ago. With multiple modifications over the years, citizens now can use their CPF savings to purchase public and private housing, pay for medical expenses, education, investment options and even insurance protection plans. However, with changes come a myriad of benefits as well as flaws. General public discontent lies in a few main issues. Firstly, the fact that interest accrued by CPF savings is too low. Secondly, much of the government approved investments of CPF monies were lost due incorrect timing of the investments and high transactions costs. Thirdly, the minimum-sum scheme introduced in 1987, disallowed full withdrawal of one’s CPF savings at age 55. CPF savings are invested in Special Singapore Government Securities (SSGS). These bonds have consistently achieved a triple-A (AAA) rating, the highest possible credit rating by the three main credit rating agencies worldwide. Standard & Poor’s, Moody’s and Fitch Group. The income from the issuance of these bonds are then combined together with other government funds which are then placed with the Monetary Authority of Singapore (MAS), the central bank. Before the establishment of the Government Investment Corporation (GIC), a sovereign wealth fund, MAS managed the CPF savings through an outdated,...
Words: 1521 - Pages: 7
