>From Brad Setser's Blog:
http://blogs.cfr.org/setser/2008/11/25/bonfire-of-sovereign-wealth-funds/
Bonfire of the Sovereign Wealth Funds?
"Only a few sovereign funds disclose their performance. But it reasonable to think that many sovereign wealth funds – particularly the well-established funds that invested heavily in equities – have had a bad year. Any sovereign fund overweight emerging economy equities – say those who were seduced by talk of a new Silk Road linking the Gulf to Asia – would have done worse. Ask some prominent US institutional investors.
Indeed, the United States Social Security Trust Fund likely has outperformed most sovereign funds over the past few years. The Social Security Trust Fund invests in nothing other than US Treasuries. That currently looks to have been a good choice. An enterprising Norwegian journalist supposedly has calculated that Norway would be better off now if it had just put all its spare oil revenue in the bank.
The fall in equity markets this fall implies that sovereign wealth funds now likely manage far less than $2 trillion in foreign assets.
...Norway offers a case in point. I think it had around $380 billion in assets earlier this year. It now has around $300 billion....
...Reports suggest that Kuwait is now selling foreign assets....
...Russia's sovereign fund seems likely to become a vehicle for supporting Russian firms rather than a vehicle for investing abroad....
...The Korea Investment Corporation cannot sell its stake in Merrill to finance its intervention in the foreign exchange market – at least not easily. Indeed, Korea is now considering issuing a bond to raise additional foreign currency cash – cash that is currently tied up in the KIC....
....The foreign exchange needs of large emerging economies in the recent crisis have been enormous – Brazil has committed $50 billion of its reserves to a set of currency swaps to help address a dollar shortage, Korea has committed $100 billion to backstop its banks and Russia's commitments add up to something like $200 billion....
Sebastian Mallaby now says that sovereign funds now look like a bull market luxury."
Looks like the idea that sovereign wealth funds were going to dominate the world economy was about as sensible as the idea I read in 2007 that Goldman should bail out the U.S. treasury.
"....
-- peace,
boddi
http://financialroadtosocialism.blogspot.com/