Artigo de Barron's muito interessante sobre os SWF
A World Awash In Money By Andrew Bary China's move to invest $3 billion in the Blackstone Group in conjunction with
the private-equity firm's looming initial public offering highlights the growing
financial power of an obscure group of state-run funds that invest on behalf of
countries.
These entities, known as sovereign wealth funds, may hold as much as $2.5
trillion in assets, and could swell in size to a staggering $12 trillion by
2015, according to a May 3 research report by Morgan Stanley currency strategist
Stephen Jen. These funds differ from official government reserves, which topped
$5 trillion earlier this year, and have been stashed largely in U.S. Treasuries
and European government bonds.
Countries like China and Russia think they have sufficient reserves to meet
potential runs on their currencies, and have created sovereign wealth funds in a
bid to earn higher returns. Increasingly, these and other nations, including the
oil-rich United Arab Emirates and Norway, are expected to funnel new money into
wealth funds rather than government securities. Jen estimates sovereign wealth
funds could match the size of official government reserves by 2011.
The growth of such funds is bullish for global stocks and real estate in both
the developed world and emerging economies. It is tough to track the investments
of these wealth funds because many don't disclose their size or asset
composition publicly. Most of their money is farmed out to non-affiliated
investment managers. The Emirates' super-secret Abu Dhabi Investment Authority could total $875
billion, making it the largest of the sovereign wealth funds, writes Jen. Other
estimates put the size of the fund at closer to $500 billion. Saudi Arabia may
have funds totaling $300 billion. The rapid rise of sovereign wealth funds dramatizes the shift in financial
power and wealth from the U.S., the world's largest debtor, to an increasingly
important group of creditor countries. But the growing financial power of
sovereign wealth funds may spur financial protectionism in the U.S. and other
western countries as the funds seek to buy more assets. A chemical company
controlled by the Saudi government last week reached a deal to buy General
Electric's (ticker: GE) plastics business for $11 billion.
Russia, which was nearly bankrupt a decade ago, is planning to put a chunk of
its $357 billion of official reserves into a Future Generations Fund that will
invest beyond government securities. That fund could be staked with about $30
billion. South Korea has formed the Korea Investment Corp. with $20 billion, and
Australia has launched a $40 billion Australian Future Fund.
There are several reasons for the rapid growth of sovereign wealth funds. High
oil prices are filling the coffers of countries like Russia, the Emirates, Saudi
Arabia and Norway. Elsewhere, China's enormous trade surplus is producing rapid
growth in its dollar reserves as the country seeks to hold down the value of the
Chinese currency by purchasing dollars from Chinese exporters.
The most transparent big fund, the Norwegian Government Pension Fund, totals
more than $300 billion, up from $90 billion in 2002. Norway added $60 billion
alone last year. A major oil producer, Norway established its fund to act as a
financial stabilizer if oil prices declined, depressing tax revenue. With oil
prices moving above $60 a barrel and holding there, the Norwegian fund no longer
needs to stabilize anything and can act as a pension fund. The Government
Pension fund holds about $60,000 for each of Norway's nearly 5 million citizens.
China rapidly has built $1.2 trillion of currency reserves, the largest in the
world, mostly because of the country's enormous trade surplus with the United
States. China is seeking to invest a portion of those funds more aggressively to
get higher returns and advance the country's economic and political goals.
The new Chinese fund investing in Blackstone, to be called the State
Investment Co., could get $200 billion to $300 billion of capital and expand
rapidly from that base because China's currency reserves are growing by more
than $200 billion annually. The Chinese government is thought to believe it
needs no more than $1 trillion of reserves to combat potential pressure on its
currency or deal with domestic financial crises.
"China wants a foothold in the American economy and it's getting that via a
private-equity firm," says Byron Wien, chief investment strategist at Pequot
Capital Management in New York. "This is an indirect way to make direct
investments."
As one of the leading private-equity investors, Blackstone controls or has a
big stake in a growing number of companies, including Michaels Stores, Freescale
Semiconductor and Equity Office Properties. China may view Blackstone as a
mutual fund of American companies. 
China is apt to flex its financial muscle even more in the future. Expect more
Blackstone-type investments or outright attempts to purchase American companies.
China's growing financial power could cause a ruckus in Washington, where many
lawmakers are upset with what they view as its unfair trading practices. U.S.
political pressure helped scuttle a 2005 attempt by China's state-controlled oil
company to buy Unocal, an independent energy producer with sizable Asian
reserves that was later sold to Chevron.
Similarly, the move by state-owned Dubai Ports World to buy the port
operations in several American cities was scuttled on security grounds.
Where might China invest? It has an enormous appetite for commodities, notably
oil, and could seek to purchase commodity producers based in the U.S., Canada or
Australia. China has been rumored to be eyeing Canada's oil-sands region for a
major investment. Technology companies, including those with clean-energy
products, also could appeal to the Chinese.
Singapore's Government Investment Corp., which was started in 1981 by the
wealthy city state, now could total more than $300 billion. Singapore discloses
little about the fund, saying only that it has more than $100 billion.
Japan could create one of the largest sovereign wealth funds with its $880
billion in official reserves. Why does a country like Japan need almost $900
billion of emergency money when the U.S. has $67 billion and Britain, France and
Germany each have less than $50 billion? The risk-averse Japanese government
traditionally has been willing to hold such large currency reserves partly
because they yield about 4%, considerably above the 1% rate on domestic bonds.
Yet Japan arguably could put some of that $880 billion to better use given its
looming demographic problem caused by a rapidly aging population. There has been
some talk in Japan about creating a sovereign wealth fund.
Sophisticated investors are wrestling with the financial implications of the
growth of these funds. "You want to try to understand which assets will be
bought and sold and at what rate," says Mohamed El-Erian, the president of
Harvard Management Co., which runs the university's $30 billion endowment.
The U.S. Treasury market, for instance, could be hurt if countries plow new
money into sovereign wealth funds rather than keeping it in official reserves,
which are invested in government bonds. The growth in central-bank holdings of
Treasuries in recent years helps explain the surprising strength in the Treasury
market in the face of the sharp upward movement in short rates to 5% from 1%.
The Chinese and other big holders of Treasuries aren't apt to sell them, but
new demand could decline. Stocks, real estate and commodities, on the other
hand, all could benefit. The Norwegian Government Pension Fund recently shifted
its targeted asset mix to 60% stocks and 40% bonds from 40% stocks and 60%
bonds. Norway has caused a stir because an ethical investing code for its fund
has resulted in the exclusion of certain defense contractors like General
Dynamics (GD), Lockheed Martin (LMT) and Boeing (BA), as well as Wal-Mart Stores
(WMT).
Berkshire Hathaway CEO Warren Buffett has warned that America, in running a
$700 billion annual trade deficit, effectively is selling itself to its trading
partners. China's purchase of part of Blackstone may be just the beginning of a
trend that could alter not only financial markets but the political landscape
and our place in the world. ---
