Here’s an excellent post from Brad Sester’s blog “Follow the Money” from the Council on Foreign Relations site. Brad models out how rough the year’s been for Sovereign Wealth Funds. The article and subsequent comments are well worth reading!
“Santiago Principles” – International Working Group of Sovereign Wealth Funds Reaches Preliminary Agreement on GAPPSeptember 4, 2008
Yesterday, the International Working Group of Sovereign Wealth Funds announced a preliminary agreement on a draft set of principles and practices that the various participants will recommend to their respective governments. The IWG intends to publish the GAPP after it presents the report to the IMFC at its October 11th meeting in Washington DC.
It’s a step towards greater transparency to ease public and legislative concerns. Now about their performances…
So SWFs are feeling the pain from their investments in American mortgage firms Fannie Mae and Freddie Mac? An article from the International Herald Tribune indicates that SWFs investments in US banks have lost 30 to 50 percent off their original value and that coupled with Fannie and Freddie’s problems the sovereign wealth funds are running to Asia to the benefit of Asian currencies and assets and to the detriment of the US dollar.
But aren’t SWFs long-term investors? Shouldn’t they have foreseen that the banks would be down until the cycle runs it’s course? The need to diversify their currency portfolio’s aside, isn’t it best to buy low now? Much has been said concerning SWFs teaming well with private equity firms as both look for investments that are relatively longer in term and perhaps they both are now suffering from the similar plight of having ample amounts of cash in their coffers but not enough good places to invest it. LPs often worry of drift by the PE firms in these conditions. Perhaps SWFs are becoming guilty of the very thing?