from Follow the Money

I guess sovereign funds use leverage afterall

August 13, 2008

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Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

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Via SWF Radar comes news that two of the smaller sovereign funds in the Gulf want to gear up.

Abu Dhabi’s Taqa looks more and more like a sovereign fund specializing in energy, and it too uses leverage.

Some sovereign funds also are interested in a bit more than returns -- they also look to invest abroad in ways that will further the economic development of their home country. Or try too.

The closer you look, the harder it is to generalize about sovereign funds. Some are unleveraged and focus on returns, in much the same way as a typical pension fund. Some are leveraged. Some have a mandate that extends beyond financial returns, looking more like industrial policy vehicles than a typical pension fund. And some don’t disclose enough for anyone to know what they really do ...

Incidentally, while I don’t agree with every argument that George Abed makes, I do think he did a good job of summarizing the debate over sovereign funds. His FT oped is certainly worth reading closely.

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