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Gaim Presentation by Drosten Fisher of Monitor Group November 16, 2008
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Transcript of Gaim Presentation by Drosten Fisher of Monitor Group November 16, 2008
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 1
Assessing the Risks
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 2
Assessing the RisksContents
Overview of SWF Landscape
Methodology of Study
SWF Behavior: The Evidence of Public Transactions (2000-2008q1)
Recent SWF Behavior: 2008q1 vs. 2008q2
Implications for the Future
Q & A
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 3
Assessing the RisksSWF Establishment: the First Trends
There were three major waves of SWF formation, in the 1970s, the 1980s and the 1990s. The olderSWFs, such as KIA and ADIA, tend to be more conservative in their investment approach
Source: Deutsche Bank; Standard Chartered
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 4
Assessing the RisksThe Current Wave of SWF Formation
However, about half of all existing SWFs — 18 — were formed in the fourth wave 2000–2007. NewerSWFs, such as Istithmar, Mubadala, and DIFC, tend towards a more aggressive investment approach.
Source: Deutsche Bank; Standard Chartered
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 5
Assessing the Risks
Industrial countries
Asia
Latin America
CEE
Middle East
Foreign Reserves 2006(USD 4.2 Trillion)
31
34
55
63
72
83
87
101
153
168
179
262
272
280
464
1,528
0 500 1,000 1,500 2,000
India
Taiwan
South Korea
Brazil
Singapore
Hong Kong
Malaysia
Mexico
Thailand
Turkey
Poland
Indonesia
Saudi Arabia
Egypt
China
Russia
The Emergence of Sovereign Wealth Funds
Foreign Reserves in USD Bn (2007)
Foreign Reserves 1996(USD 1.5 Trillion)
Driven by high commodity prices, and favorable balance of trade, foreign exchange reserves are high inmany emerging countries. Many countries with high foreign reserves choose to set up Sovereign WealthFunds (SWFs).
Source: The Economist, February 2007; Deutsche Bank
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 6
Assessing the Risks
8
30
31
33
33
80
108
200
250
250
330
875
1,635
1,749
1,813
0 500 1,000 1,500 2,000 2,500
Kuwait Investment Authority
Barclays Global Investors
State Global Investors
Fidelity Investments
ADIA
GIC
CALPERS
JPM Asset Management
China Investment Company
Temasek
Carlyle Group
Goldman Asset Management
KKR
Bridgewater Associates
Istithmar1
3
4
16
18
21
23
36
42
45
64
0 25 50 75
Bank Assets
World GDP
Stock Market Cap
Private Debt Securities
Public Debt Securities
Investment Funds
Pension Funds
Insurance Companies
Reserves ex Gold
SWFs
Hedge Funds
Assets Managed by FinancialInstitutions in USD Billions (2005)
Size of Sovereign Wealth Funds
Global Asset Classes inUSD Trillions (2005)
Source: Citibank; Standard Chartered; Deutsche Bank
As a group, SWFs are relatively small compared to other global asset classes, but individual SWFs aresignificant players. SWFs are emerging as significant players in the global financial systems, both asinvestors and as providers of liquidity.
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 7
Assessing the RisksGeographical Spread of SWFs
Source: Deutsche Bank; Standard Chartered
Today, SWFs are estimated to hold up to $3 trillion in total assets, with the Middle East and East Asiafunds having 80 per cent by dollar value.
1.2East TimorTimor Leste Petroleum Fund
10New
ZealandNew Zealand Superannuation Fund
15TaiwanTaiwan National Stabilization Fund
18MalaysiaKhazanah Nasional BHD
20KoreaKorean Investment Corp
35BruneiBrunei Investment Agency
50AustraliaAustralian Government Future Fund
108SingaporeTemasek Holdings
140ChinaHong Kong Monetary AuthorityInvestment Portfolio
200ChinaChina Investment Company
330SingaporeGovernment of SingaporeInvestment Corporation (GIC)
SizeSizeCountryCountryFundFund
0.2PNGMineral Resources StabilizationFund
Asia and the Pacific ($927 bn)
North and South America ($90 bn)
29IrelandNational Pensions ReserveFund
322NorwayGovernment Pension Fund— Global
SizeSizeCountryCountryFundFund
2.6NorwayGovernment PetroleumInsurance Fund
Europe ($354 bn) Russia and Central Asia ($147 bn)
15IranForeign Exchange Fund
10Abu DhabiMubadala
8.2OmanGeneral Stabilization Fund
12DubaiIstithmar
25AlgeriaReserve Fund
40QatarQatar Investment Authority
50LibyaReserve Fund
250KuwaitKuwait Investment Authority
300Saudi ArabiaVarious Funds
875Abu DhabiAbu Dhabi InvestmentAuthority
SizeSizeCountryCountryFundFund
n/aDubaiDIFC
Middle East and North Africa ($1,571 bn)
n/aMauritaniaNational Fund forHydrocarbon Reserves
n/aAngolaReserve Fund for Oil
0.4UgandaPoverty Action Fund
4.7BotswanaPula Fund
11NigeriaExcess Crude Account
SizeSizeCountryCountryFundFund
Sub-Saharan Africa ($16 bn)
18KazakhstanKazakhstan National Fund
127RussiaStabilization Fund
SizeSizeCountryCountryFundFund
1.5AzerbaijanState Oil Fund
0.8VenezuelaInvestment Fund forStabilization
3.2U.S.Permanent WyomingMineral Trust Fund
6ChileEconomic and SocialStabilization Fund
15U.S.New Mexico StateInvestment Office
17CanadaAlberta Heritage Fund
40U.S.Alaska PermanentReserve Fund
SizeSizeCountryCountryFundFund
0.6ChilePension Reserves Fund
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 8
Assessing the Risks
RecipientRecipientCountryCountry
GovernmentsGovernments
SovereignSovereignGovernmentGovernment
OwnersOwners
OtherOtherFinancialFinancial
InstitutionsInstitutions
MultilateralMultilateralRegulatory andRegulatory and
OversightOversightInstitutionsInstitutions
CompaniesCompaniesConsideringConsidering
SWFSWFInvestmentsInvestments
SWFsSWFs
There Are Six Major Constituencies Affected by the Rise of SWFs
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 9
Assessing the RisksConstituency Interests and Concerns
Interests
Capture benefits of this form ofinvesting (diversification, higher returns,flexibility)
Increase long-term national wealth
Increase influence in global financialaffairs
Increase clout in global financial system
Concerns
Avoiding protectionist backlash thatmight hurt broader trade interests
Interests
Welcome responsible foreign investors
Protect vital economic and national security assets
Ensure reciprocity in trade, investing
Concerns
Monitoring SWFs owned by unfriendly governments
Limiting potential for nonfinancial behaviors
Fearing SWFs may be Trojan horses
Monitoring funds that are not transparent
In OECD countries, fearing potential loss of economic andpolitical power
Interests
Maintain free flow of capital globally
Preserve level playing field for allinvestors
Preserve systemic stability
Concerns
Monitoring funds that are nottransparent
Limiting potential for nonfinancialbehaviors
Guarding against corruption
Protecting against poor riskmanagement
Interests
Enact desire to work with SWFs aspartners, co-investors, clients
Maintain open access to all SWFs
Maintain access to opportunities innew geographies
Concerns
Fearing that SWFs will have unfairadvantages (lower cost of capital,privileged access to information anddeal flow)
Worrying about effect on marketdynamics (asset pricing, riskpremiums)
Interests
Preserve equal access to opportunities and talent worldwide
Achieve and sustain highest level of professionalism
Preserve autonomy
Maintain low profile
Concerns
Avoiding regulatory barriers, uneven treatment relative toother asset classes
Avoiding political firestorms when investing abroad
Interests
Gain access to foreign sources ofcapital
Welcome long-term passive investors
Gain access to opportunities in newgeographies
Concerns
Avoiding potential PR firestorms
Preserving freedom to operate incertain countries or sectors
Minimizing foreign political interferencein decision making
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 10
Assessing the RisksContents
Overview of SWF Landscape
Methodology of Study
SWF Behavior: The Evidence of Public Transactions (2000-2008q1)
Recent SWF Behavior: 2008q1 vs. 2008q2
Implications for the Future
Q & A
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 11
Assessing the RisksWhat Is a Sovereign Wealth Fund?
Source: Robert Kimmitt, Public Footprints in Private Markets, Foreign Affairs, January / February 2008
SWFs are part of a range of government investment vehicles. We used three criteria to define SWFs:1.) owned by a sovereign government, 2.) managed separately from official foreign currency reserves ofthe monetary authority, and 3.) invest in a portfolio of asset classes including foreign assets
Sovereign Funds
Official Reserves /Central Bank
External assets fordirectly financinginternationalpaymentimbalances
Highly liquid, oftenOECD governmentbonds
Pension Funds
Investmentvehicles to meetgovernment’sfuture pensionobligations
Funded anddenominated inlocal currency
DomesticSovereign Funds
Investmentvehicles toencouragedomestic economicdevelopment
Funded anddenominated inlocal currency
Sovereign WealthFunds
Investmentvehicles funded byforeign exchangeassets
Managedseparately fromofficial reserves
Typically have ahigher tolerance forrisk
State OwnedEnterprises
Companies wherethe state hassignificant control
May makeinvestments inforeign assets
Federal Reserve(U.S.)
Bank of England (UK)
SAMA (Saudi Arabia)
Government PensionFund (Norway)
GIC (Singapore)
Khazanah Nasional(Malaysia)
ADIA, Mubadala(Abu Dhabi)
Temasek, GIC(Singapore)
Istithmar, DIFC(Dubai)
CIC (China)
SAMA (Saudi Arabia)
CNOOC (China)
Gazprom (Russia)
SABIC (Saudi Arabia)
EXAMPLES
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 12
Assessing the RisksMonitor SWF Transaction Database: Methodology
Publicly available sourcesPublicly available sourcesof SWF activityof SWF activity
SWFsSWFs andandrecent dealsrecent deals
Data assessment
Focus on direct investmentFocus on direct investmentin equities and real estatein equities and real estate
Final DatasetFinal Dataset
Data collected
Data checked andverified
Limitedtransparency andspotty reporting
1,181 deals, 25 funds1975–Q1 2008
Funds not meeting ourdefinition
Deals before 2000
17 funds, 785 deals$250 bn investment
Subscriptiondatabases, pressarticles, websites offunds, and recipientcompanies
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 13
Assessing the RisksFunds Used in the Monitor Database
Monitor’s SWF Transaction Database includes 17 funds for which we found public deal information
CountryCountry Fund NameFund NameYear ofYear of
FoundingFoundingAssets Under ManagementAssets Under Management
(USD(USD BnBn))Transactions in MonitorTransactions in Monitor
DatabaseDatabase
Singapore Temasek Holdings 1974 108 393
Malaysia Khazanah National BHD 1993 18 76
Singapore Government of Singapore Investment Corporation 1981 330 74
UAE Istithmar 2003 12 63
Libya Libyan Investment Authority N/A 50 45
UAE Mubadala Development Company 2002 10 34
Qatar Qatar Investment Authority 2005 40 22
UAE Abu Dhabi Investment Authority 1976 875 16
Kuwait Kuwait Investment Authority 1953 250 13
Brunei Brunei Investment Agency 1983 35 12
UAE Dubai International Financial Centre Investments 2006 N/A 11
China China Investment Company Limited 2007 200 9
New Zealand New Zealand Superannuation Fund 2003 10 8
Ireland National Pensions Reserve Fund 2001 29 5
Iran Foreign Exchange Reserve Fund 2000 15 2
Hong Kong Hong Kong Monetary Authority Exchange Fund N/A N/A 1
Azerbaijan State Oil Fund 1999 1.5 1
Source: Truman, “SWFs: The Need for Greater Transparency and Accountability”, Peterson Institute, August 2007
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 14
Assessing the RisksContents
Overview of SWF Landscape
Methodology of Study
SWF Behavior: The Evidence of Public Transactions (2000-2008q1)
Recent SWF Behavior: 2008q1 vs. 2008q2
Implications for the Future
Q & A
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 15
Assessing the Risks
85
146
129137
90
47
6063
53
8592
49
28
86343
0
40
80
120
160
2000 2001 2002 2003 2004 2005 2006 2007 2008(H1)
Number
Value ($Bn)
Recent SWF Investments by Year
Since 2000, there has been a marked increase in SWF direct investment in equities and real estate.
SWF Equity Transactions by Number and Volume Since 2000
Note: Publicly available data for SWF equity dealsSource: Monitor SWF Transaction Database
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 16
Assessing the RisksSWF Investment by Area
Since 2000, some two thirds of SWF investment by value has been in the OECD. However, two thirds ofthe deals by number were in emerging markets.
OECD61%
BRIC14%
Non-OECD(excluding BRIC)
50%
BRIC19%
OECD31%
Number of Deals by Region(785 deals)
Value of Deals by Region($250 Bn)
Non-OECD(excluding
BRIC)25%
Note: Publicly available data for SWF equity deals 2000-Q1 2008Source: Monitor SWF Transaction Database
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 17
Assessing the Risks
Since 2000, funds based in MENA have invested $100 billion in 205 deals. $73 billion has gone to NorthAmerica and Europe, but this accounted for fewer than half the deals.
Investment Flows: Middle East and North Africa (MENA)
Note: Publicly available data for MENA SWF equity deals 2000-Q1 2008Source: Monitor SWF Transaction Database
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 18
Assessing the RisksInvestment Flows: Asia-Pacific
Since 2000, Asian SWFs invested $150 billion in 573 deals. These invest more heavily in their own region;half of the total investment by value and some 80% of deals by number took place in Asia.
Note: Publicly available data for Asia-Pacific SWF equity deals 2000-Q1 2008Source: Monitor SWF Transaction Database
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 19
Assessing the RisksDomestic / In-Region / Out-of-Region
In-region36%
Domestic35%
Out-of-region29%
9
11
12
13
16
22
34
45
63
74
76
393
NumberNumberof Dealsof Deals
56%22%22%China Investment Co. Ltd.
82%─18%Dubai International Financial Centre
42%25%33%Brunei Investment Agency (BIA)
46%38%15%Kuwait Investment Authority (KIA)
69%13%19%Abu Dhabi Investment Authority (ADIA)
77%23%─Qatar Investment Authority (QIA)
53%18%29%Mubadala Development Company
56%40%4%Libyan Investment Authority
78%6%16%Istithmar
38%61%1%Government of Singapore InvestmentCorporation (GIC)
1%20%79%Khazanah Nasional Bhd
12%45%43%Temasek Holdings
% Out% Out--ofof--RegionRegion
% In% In--RegionRegion
%%DomesticDomestic
FundFund
Note:Source: Monitor SWF Transaction Database
Number of Deals by Region2000–Q1 2008
(785 deals)
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 20
Assessing the Risks
By number of deals, SWFs invest across sectors, including financial services, real estate, industrials,consumer and IT. However, by value, almost half the deals are in financial services, which reflects atypicalintensity of investment in that sector during the sub-prime mortgage crisis during 2007 and early 2008.
Number of Deals by Sector(785 deals)
Value of Deals by Sector($250 Bn)
Other3%
Transport4%
Healthcare4%
Telecom6% Financials
22%
Real Estate18%
Industrials15%
IT10%
Energy8%
Other8%
Healthcare2%
Telecom2%
IT1%
Consumer3%
Industrials8%
Financials46%
Real Estate19%
Energy11%
Consumer10%
SWF Investment by Sector
Note: Publicly available data for SWF equity deals 2000-Q1 2008Source: Monitor SWF Transaction Database
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 21
Assessing the RisksSWF Investment: Analyzing Ownership and Control
Contrary to popular opinion, SWFs do take controlling stakes, however they rarely do so in OECDmarkets.
Notes: Sensitive sectors include Energy & Utilities, Financials, Information Technology, Infrastructure and Government, Telecom, and Transportation & AerospaceSource: Monitor SWF Transaction Database
8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%3%
8%
39%
50%
Number of Deals
11%
10%
71%
Value of Deals
Controlling Stake in"Sensitive" Sectors - OECD
Controlling Stake inNon-Sensitive Sector - OECD
Controlling Stake - Non-OECD
Not a Controlling Stake
Stake Data by Sector and Geography, 2000–Q1 2008
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 22
Assessing the RisksSummary of Findings on Investment Behavior of SWFs
SWFs invest heavily in domestic and emerging markets. A majority of SWF investments by value occur in
OECD markets, although the proportion is magnified by recent large investments during the credit crunch of
2007–2008. More than half of all transactions by number have occurred in domestic and emerging markets.
Recent SWF investments in U.S. and European financial services firms are atypical and opportunistic,
reflecting the credit crunch of 2007–2008. Most SWF investments have occurred in financial services, real
estate, and industrial companies, with most publicity focused on financial services. Controlling for the effects of
the recent credit crunch, the apparent appetite for investment in this sector drops markedly, though it remains
significant.
SWFs are willing to take controlling stakes in companies. In contrast to prevailing views, since 2000,
SWFs have acquired controlling stakes in half of their transactions for which stake data are available. By far
most of these deals occurred in emerging markets and in sectors not generally deemed politically sensitive.
SWFs are taking more financial risk with their investments. Most SWFs are adjusting their portfolios to
combine conservative and relatively liquid asset classes, such as government bonds, with higher-risk, illiquid
assets such as equities, real estate, and alternative instruments.
SWFs do not appear to be investing for political motives. Some funds are making strategic investments to
hasten economic development in their home country, but they do not appear to be active in ways that threaten
the economic or national security of foreign countries where they invest.
11
22
33
44
55
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 23
Assessing the RisksContents
Overview of SWF Landscape
Methodology of Study
SWF Behavior: The Evidence of Public Transactions (2000-2008q1)
Recent SWF Behavior: 2008q1 vs. 2008q2
Implications for the Future
Q & A
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 24
Assessing the RisksRecent SWF Behavior: Q2 2008 vs. Q1, by Target Sector
Value of SWF Investments Q1 and Q2 2008 by Target Sector
Note: Publicly available data for SWF equity deals Q2 2008Source: Monitor SWF Transaction Database
In Q2 of 2008 SWFs investing $26.5 billion in public equity deals, compared to $58.3 billion in Q1. Of thistotal value in Q2, half was invested in real estate, while significantly less went into financial services
13.7
0
10
20
30
40
50
60
70
2.12.2
9.5
43.4
58.3
Q1 2008
2.53.2
4.0
26.5
Q2 2008
Infrastructure
Services
Technology
Healthcare
Transportationand Aerospace
Telecom
Consumer
Real Estate
Industrials
Energy & Utilities
Financials
1.6
$ Bn
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 25
Assessing the RisksRecent SWF Behavior: Q2 2008 vs. Q1, by Target Region
Note: Publicly available data for SWF equity deals Q2 2008Source: Monitor SWF Transaction Database
By geographic region, SWFs continued to invest actively in emerging markets (over half of the Q2 total),while dramatically reducing their investment in North America
11.1
0
10
20
30
40
50
60
70
11.1
23.1
24.2
58.4
Q1 2008
2.0
8.0
0.94.4
26.4
Q2 2008
MENA
Sub-Saharan Africa
Multiple Regions
Europe(including Russia)
North America
Asia Pacific
Value of SWF Investments Q1 and Q2 2008 by Target Region
$ Bn
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 26
Assessing the RisksQ2 Highlights
In the second quarter of 2008, funds in the Monitor SWF Transaction Database executed
43 deals totaling $26.5 billion. In contrast, those funds executed 42 deals totaling $58.3
billion during the previous quarter (Q1 2008).
Half of the deals by value in Q2 were in real estate. Real Estate had the largest number of
deals (12) and the highest investment ($13.7 billion) in Q2 2008.
During Q2 2008, investment shifted away from financial services. SWFs carried out 10
deals and invested $4 billion in the financial services sector during Q2 2008. In the previous
quarter (Q1 2008), funds carried out 13 deals totaling $43.4 billion.
SWFs continued to invest actively in emerging markets. In Q2 2008, over half of the deals
and funds invested were in emerging markets. SWFs carried out 26 deals and invested $15
billion in BRIC and other non-OECD countries.
Investment in North America dropped dramatically. In Q2 2008, 4 deals totaling less than
$1 billion were received by North America. In contrast, this region received 7 deals totaling $23
billion during the previous quarter (Q1 2008).
11
22
33
44
55
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 27
Assessing the RisksContents
Overview of SWF Landscape
Methodology of Study
SWF Behavior: The Evidence of Public Transactions (2000-2008q1)
Recent SWF Behavior: 2008q1 vs. 2008q2
Implications for the Future
Q & A
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 28
Assessing the RisksImplications for Key Constituencies
Invest in a way that encouragesdevelopment of domestic industries
Develop a track record of investmentbehavior that meets internationallyaccepted standards
Increase transparency aroundpolitical intentions and investmentstrategy
Understand SWF motivationand also potential risks
Acknowledge and addressconcerns of corporatestakeholders and otherconstituencies
Ensure that changes to regulatoryframeworks preserve the benefitsSWFs’ offer and avoid penalising them
Treat SWFs like other investors andwatch closely for signs of inappropriateinfluence of sovereign governmentleaders
Develop common and effectivestandards of SWF transparency
Create distance from sovereign government owners toreinforce perceptions of autonomy
Demonstrate that funds are professionally managed
Put in place robust risk-management systems
Build and disclose a track record illustrating pursuit offinancial goals
Study SWF investment patternsto identify opportunities forcollaboration and co-investment
Get to know principals at SWFsand understand their needs
Treat SWFs on equal terms to other foreign investors
Assess potential risks on the basis of clear, transparent criteria
Increase scrutiny and review for transactions in sectorsthat have national security implications
RecipientRecipientCountryCountry
GovernmentsGovernments
SovereignSovereignGovernmentGovernment
OwnersOwners
OtherOtherFinancialFinancial
InstitutionsInstitutions
MultilateralMultilateralRegulatory andRegulatory and
OversightOversightInstitutionsInstitutions
CompaniesCompaniesConsideringConsidering
SWFSWFInvestmentsInvestments
SWFsSWFs
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 29
Assessing the RisksSWFs: Looking Forward
SWFs will become fixtures of the global financial system, with more and bigger fundsemerging and with continued appetite for higher risk-adjusted returns. Current marketforces and improved reception of the funds will tend to reinforce their positive impact
The recently released, voluntary Santiago Principles of the IMF’s International WorkingGroup of SWFs are very positive step in the creation of an international framework forfund best practices– Further progress still can be made on third-party verification of compliance either
through IWG’s Standing Group or individual fund actions (e.g., ADIA)
Similar progress is required in creating a reciprocal framework among recipientgovernments to ensure open and fair investment access to SWFs– OECD Declaration on SWFs adopted in June is only a minimal first step
SWFs are just one form of government investment vehicle. Central banks (e.g., SAFEand SAMA) and state-owned enterprises, which are also participating in a broad range offoreign assets classes, warrant attention as well
Copyright © 2008 Monitor Company Group, L.P. — Confidential — CAMZAD-NED-Prez-Date-CTL 30
Assessing the RisksContents
Overview of SWF Landscape
Methodology of Study
SWF Behavior: The Evidence of Public Transactions (2000-2008q1)
Recent SWF Behavior: 2008q1 vs. 2008q2
Implications for the Future
Q & A