unlocking the mystry of sovereign funds mba

8/18/2019 Unlocking the Mystry of Sovereign Funds MBA

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• Definition

• Interested Facts about Sovereign InvestmentFund

• Types of Sovereign Funds

• Ranking of Sovereign Funds.

• Challenges

• Alternative Source of Capital

• Conclusion


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• A Sovereign Wealth Fund (SWF) is a state-

owned investment fund or entity that is

commonly established from balance of

payments surpluses, official foreign currency

operations, the proceeds of privatizations,

governmental transfer payments, fiscal

surpluses, and/or receipts resulting fromresource exports.


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• Some funds may invest indirectly in domesticindustries.

• In addition, they tend to prefer returns over

liquidity, thus they have a higher risk tolerancethan traditional foreign exchange reserves.

• Tend to enjoy “longer-term investment

horizons” and have more flexibility withliabilities than pension funds and insurancecompanies.


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• Stabilization Funds : Protect & stabilize thebudget and economy from excess volatility inrevenues/exports

• Savings / Future Generations Funds: Increasesavings for future generations.

• Pension Reserve Funds : Long term

•Reserve Investment Funds

• Strategic Development SWFs : Sustainablelong term capital growth for target countries


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• Two Main Challenges :

• Funding : Capital Raising

•

Investment Strategy : Objective


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• SWF sourced by Commodity Surplus Trading :

Oil , Natural Gas ..etc , These types of SWF are

exposed to a critical type of risk called cyclical

risk . As these funds would take into

consideration Oil/commodity price risk ..

• Concentration Risk .


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• SWF Sourced by Fiscal Surplus are likely to be

influenced by changes in government budgets

and political issues that may change the whole

investment criteria .

• Some countries have no fiscal or Commodity

surplus …!


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• SWF Sourced by Fiscal Surplus are likely to be

influenced by changes in government budgets

and political issues that may change the whole

investment criteria .

• Some countries have no fiscal or Commodity

surplus …!


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• Issuing Bonds

• Issuing Sukuk

•

Investment Certificate .


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• Sovereign : STATE (Government ) to set the

legal basis in which sovereign wealth funds

could be created in a professional and legal

manner .

• Wealth : Long Term Investment

• Fund : Well Structured , Audited and

Transparent .


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• State could Establish one Main Fund and Subfunds

• Each sub fund could have a specific

Investment Objective , Issue InvestmentCertificates ,Sukuk , Bonds . i.e.: Renewableenergy

•

Return on Capital is 20%• Egyptian regulation …???

• Capital Protected Fund ….???


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• Volvo Case ..( Sold to Gelly Chinese CarManufacturing..Imagine that SWF of Egyptacquired Volvo ..!

• Transferring car manufacturing technology toEgypt .

• Could manufacture cars locally with low price .

•Export to African Market and other market .

• Increase Capital Inflow of USD and release thepressure on the Egyptian Pound


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• Other Opportunities in Drugs and Medicine

Industry .


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• Transparency

• Audited by top tier external auditor

•

Regulated .


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• Sovereign Wealth Fund could Support The

Economy of Egypt by :

• SWFs may reduce government borrowing costs.

• SWFs may limit exchange rate Fluctuations.

• SWFs may help in reducing inflation.

•

SWFs may boost transparency.


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unlocking the mystry of sovereign funds mba

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