Global Investing

Some interesting new data on sovereign wealth funds from State Street Global Advisors, a huge fund firm that does a lot of business with them. Most interesting, perhaps, is that the vast majority of sovereign wealth fund money comes from oil and gas revenues rather than from countries building up large foreign reserves from other trade, eg China.

– The U.S. firm identified 37 major sovereign wealth funds worth a total of $3 trillion. – More than two-thirds, or 70 percent, of that money came from oil and gas interests. – Of the 37, all had at least $3 billion in assets. – Eight of them had more than $100 billion. – Only 13 of the 37 funds were not based on commodity wealth. – Asia had the largest number of SWFs at 13. – The 10 funds based in the Middle East had nearly half the wealth, or 46 percent, between them.

These funds, incidentally, are becoming more like mainstream investment companies by the day. State Street says they are eventually going to turn into the equivalent of large public sector pension funds and could well start becoming more active as shareholders in companies in which they invest.

Sovereign wealth funds get a lot of press these days with
their potential for rich investment and the fear in some
quarters that they could bring foreign government influence into
domestic economies.

But State Street Global Advisors reminded us during a chat
today that SWFs are nothing new. John Nugee, who manages the
investment house’s SWF business, noted that Kuwait established
the Kuwait Investment Board (now Authority) as far back as 1953,
eight years before the country’s independence.

For those who really like their investment history, Nugee
also offered up the tale of Kiribati’s Revenue Equalisation
Reserve Fund. This SFW is a trust, set up in 1956 when Kiribati
was still the Gilbert Islands and under British rule. It
gathered the earnings from the islands’ phosphate deposits to
protect against the time when — now — there were none left.