Wednesday, October 17, 2007

Libya launches $40bn SWF

Another sign how much the world has changed. Who could have thought of quotes like this just a few years ago...

Einmal mehr ein Beispiel wie sehr sich die Welt in den letzten Jahren gewandelt hat. Oder wer hätte ernsthaft an ein solches Zitat vor ein paar Jahren glauben mögen.....
“If you wanted to invest in the past, no one would take your calls. Now bankers fly on their private jets to see us,” said Mr Layas, a former chairman of the Libyan Arab Foreign Bank. ..
Maybe there is still hope for others parts of the world.....

Evtl. besteht ja doch noch Hoffnung für Teile der Welt .....

Libya starts to deploy $40bn fund / FT

A newly established Libyan sovereign wealth fund is starting to deploy its $40bn (£19bn, €28bn) capital on international markets as the oil-rich state showcases its rehabilitation in the global community.

Following in the footsteps of the Gulf countries, the regime of Colonel Muammar Gaddafi earlier this year allocated tens of billions of dollars that had been managed by the central bank to a new entity, the Libyan Investment Authority (LIA), which will now also receive a portion of the surplus oil revenues each year.

Although the ramshackle Libyan economy is in need of massive investment after decades of isolation, the government’s stated strategy is to reduce the country’s oil dependence and diversify sources of income.


“Because of sanctions our policy used to be to protect our assets and keep our funds in short-term deposits,” said Mohamed Layas, the LIA’s executive director, in an interview with the Financial Times. “After the embargo was lifted, it was a new era, a new opening, and we had a tremendous increase in oil revenues over the last five years.”

Mr Layas said the fund, which will have offices in London and Tripoli, would concentrate at first on portfolio investments managed through western banks and institutions. But it also intends to buy real estate worldwide and, when it is more established, look at private equity transactions.

“If we buy shares in a construction company abroad, for example, the other benefit is that we will generate business for them in Libya, where we have a huge development plan,” he said.


Although not its primary target, the LIA is also considering investing in hydrocarbon development projects. It was a small partner in the $900m exploration contract BP signed with Tripoli in May. Still largely under-explored, Libya is hoping to increase its oil production from 1.7m to 3m barrels per day by 2015. Its oil revenues are expected to reach $15bn this year.

The LIA has set up a $2bn investment fund with its counterpart in Qatar to invest in Libya, Qatar and western markets. It has taken on three existing entities: the $5bn Libyan African investment portfolio; Lafico, a $3bn assets investment company mainly involved in real estate; and an $8bn existing portfolio of other international investments, largely in capital markets.

The creation of the LIA highlights the transformation of Tripoli from pariah state to international partner since its decision in 1999 to hand over suspects in the 1988 Lockerbie bombing in Scotland, and later to renounce its weapons of mass destruction.

On Tuesday, Tripoli secured a non-permanent seat on the United Nations Security Council – the body that lifted sanctions against it in 2003.

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4 Comments:

Anonymous Anonymous said...

This kind of thing could be a catalyst for efforts by countries to prevent sovereign funds from taking over important companies. For example, BMW has a market cap of less than $30 billion, so with this fund Libya could conceivably take over BMW. How many Germans would really welcome that? Not to mention Bavarians.

eh

2:17 AM  
Blogger jmf said...

Moin Eh,

yup.

The tendency around the globe goes to this direction.

But its another thing if you have to fund $ 3 billion deficits a day......

I´m just daydreaming what might happen if a SVF will take over a "Trophy US Brand" or one in France..... :-)

In the end i think the us will benefit the least from all the money that is tied to the SVF

But with no doubt all the efforts will be a major support for equities overall.

I suspect that the EM will benefit the most...

2:30 AM  
Anonymous Anonymous said...

I suspect that the EM will benefit the most...

China already invests heavily in Africa -- to secure natural resources/commodities. But EM countries tend to be politically unstable as well -- on average more so than better developed nations, anyway. And with a very small Mittelstand, im Vergleich. So you have to worry about politics, nationalization etc. Venezuela may be an example here. In an economic downturn this sort of risk increases, I would guess.

eh

2:50 AM  
Blogger jmf said...

Mahlzeit,

good points.

I think it depends on the investment style if there will be an outrage....

If they act like the Norwegian funds with only small stakes in companies and acting only as passive investors there won´t be any problems. The opposite should be true.

But the problems will start when they are more "active" or become a major/main shareholder

EADS is one example how "Scheinheilig" the debate is

The Russian have bought close to 5 percent ...

Big discussions, hostile move, calling for restrictions etc

Qatar or Kuwait has asked for a stake .... Applause

What´s the difference?

I think it is safe to say that the entire topic is great for politicians and populists to profile themselves

3:26 AM  

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