Tale of two SWFs

September 17, 2009

As the world moves closer to the end of the credit crisis, sovereign wealth funds around the world are experiencing mixed fortunes.

Good news comes from Singapore’s SWF Temasek, which springs back into gains with its portfolio climbing 32 percent between April to end-July after a 30 percent loss in the year to end-March.

Announcing its annual performance report (which should please the country’s taxidrivers), Temasek said it is open to investing in financials and resources in the long term and it has bought stakes in South Korea’s ENK, cylinder suppliers, and Brazil’s oilfield services firm San Antonio.

Moving towards the Middle East, Dubai World, a state-owned holding company, is struggling to restructure its subsidiaries.

It has moved several executives to its Istithmar unit, which owns struggling high-end retailer Barney’s New York, from its real estate unit Nakheel, which is trying to refinance $3.52 bln Islamic bonds maturing in December.

Istithmar is seen as sovereign private equity, which takes a high leverage to invest in firms, with some estimates that the capital was levered up up to 7-10 times.

Istithmar’s Barney’s, with stores in locations including New York and Beverly Hills, has struggled in the recession as wealthy consumers have cut back on spending.

Nakheel alone has cut around 900 jobs since the downturn began, put projects on hold and sold stakes in an Australian developer.

Dubai World has filed a lawsuit in the United States this week against the former head of a subsidiary it accuses of fraud costing the firm millions of dollars.

Dubai World has $59 billion of liabilities, a large proportion of the Gulf emirate’s total debt.

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