Wednesday, December 9, 2009
Friday, January 30, 2009
Nice Quotes
Everyone on the street does this views are made first, then comes research.
Tuesday, January 27, 2009
Tuesday, August 12, 2008
12 August, 2008 - Urge to Trade
Lets c how position evolves over the period of time. But one thing I m noticing more I get involved in trading position, more myopic view I have on markets. I tend to understand pulse of specific counters and lose pulse of larger dynamic picture. Have to learn switch off the counters in the mindset otherwise will be difficult for me to make money in longer term.
Monday, May 5, 2008
Game: Predict Nifty Closing
Surjit: -1.0%
Amit: -0.15% or +0.15%
Bharat: -0.55%
Yogesh: -0.8%
Check here after market for winner
Tuesday, February 19, 2008
Friday, December 14, 2007
A Closer Look at Sovereign Wealth Funds
A Closer Look at Sovereign Wealth Funds: Secretive, Powerful, Unregulated and Huge
When the
The same response followed the early December news that UBS was selling a 10.8% share to the government of
But is foreign ownership -- or, more precisely, foreign government ownership -- really a good thing? Many experts think this mushrooming trend bears watching, especially for any sign that these funds are evolving from pure investment vehicles into tools for exerting political pressure on the "target" countries. "I think pressure is a legitimate worry, but I'm not sure we have seen signs of that yet," says Wharton finance professor Franklin Allen.
There is nothing intrinsically wrong with foreign ownership, suggests Wharton finance professor Richard Marston, but ownership by foreign governments could be different from ownership by foreign businesses. "Clearly, there are industries where we would be concerned about certain countries having an ownership interest," he says, citing airlines and military contractors. "You do worry that these are governments, and you worry about their motivation."
Governments, through investment pools known as sovereign wealth funds, have put tens of billions of dollars into Western financial firms this year, from Bear Stearns and Barclays to HSBC Holdings and Blackstone Group, investing at bargain prices amid the subprime crisis. Two Middle Eastern government funds now even own a third of the London Stock Exchange.
None of this investment has drawn the kind of outrage that greeted a 2006 plan for a government-owned business in the
Concerns over Secrecy
Still, some politicians and economists are concerned about the growing power of sovereign wealth funds, most of which are based in the Middle East and
While cross-border investments are nothing new, the sovereign funds raise special questions because the investment decisions are controlled by governments rather than individuals or corporations. And, unlike central banks, which tend to invest reserves in assets like U.S. Treasury bonds, the sovereign funds often invest in corporations. This year, the largest target country for such investment has been the
The 20 largest sovereign wealth funds, each worth more than $10 billion, are estimated to control more than $2 trillion in assets, overshadowing the $1.5 trillion thought to be managed by hedge funds, which have been subject to calls for greater regulation because of their market clout. Like hedge funds, most sovereign funds are secretive. There is no comprehensive list of what they own, nor any mandatory reporting of their investment policies.
The Abu Dhabi Investment Authority, established in 1976, is the largest sovereign fund, with assets estimated at $500 billion to $875 billion, according to a widely cited analysis last August by Edwin M. Truman, senior fellow at the Peterson Institute for International Economics in
Though the funds are typically found in countries with big trade surpluses, there is one in the U.S: the state-run Alaska Permanent Fund, founded in 1976 to reinvest oil profits.
The oldest major fund,
Reinvesting Oil Profits, for Now
Most of the sovereign funds that are soaring in size have rising oil prices to thank. In fact, it's no coincidence that the biggest funds belong to oil-producing states, which are using the funds to reinvest oil profits so there will be new sources of income when the oil is gone, Marston notes, adding that
Countries that build up foreign-exchange reserves typically invest them in liquid assets like U.S. Treasuries. But once reserves are big enough to cover any short-term needs like currency intervention, countries feel they can afford to tie money up on long-term investments that offer better returns, says Wharton finance professor Richard J. Herring. "If you have your liquidity needs taken care of, then you start thinking about making longer-term investments. It's a very natural thing."
Since sovereign funds have traditionally taken a long-term approach to investing, they have had a stabilizing influence on world financial markets, Herring says. But because the top 20 sovereign funds are so large, they do put a lot of concentrated economic power under the control of a small number of people, often in autocratic countries. The smaller sum controlled by hedge funds is divided among thousands of players.
Writing in the Financial Times last July, former Treasury Secretary and Harvard president Lawrence Summers noted that government shareholders may not always have the same interests as ordinary shareholders. "The logic of the capitalist system depends on shareholders causing companies to act so as to maximize the value of their shares," he wrote. "It is far from obvious that this will over time be the only motivation of governments as shareholders. They may want to see their national companies compete effectively, or to extract technology or to achieve influence."
Governments of target, or "host," countries could find themselves in awkward situations, he said. "What about the day when a country joins some 'coalition of the willing' and asks the
So far, there have not been any serious cases of this power being used for political or other non-investment purposes. One of the few examples is relatively mild: In June 2006, the Norwegian fund sold its more than $400 million in Wal-Mart holdings, criticizing the way the company treated its workers.
Still, the temptation to use financial clout to further non-financial goals is ever-present, Herring says, recalling that many American universities and pension funds divested themselves in the 1980s of companies doing business in
An Inside Look at Western Companies
According to Herring, the sovereign funds' investments in financial-services firms may be motivated not just by hopes of good investment returns, but by the desire to learn how those Western companies operate. In addition to the recent deals,
Even so, he adds, that's no cause for alarm, as the
For many observers, the biggest concern today is not the potential for political shenanigans but uncertainty about how sovereign funds might affect the financial markets. In an article this fall in Finance & Development, a quarterly publication of the International Monetary Fund, IMF research director Simon Johnson noted that: "Unfortunately, there's a lot we don't know about sovereign funds. Very few of them publish information about their assets, liabilities or investment strategies."
If the funds emphasize a buy-and-hold strategy, as is widely thought, they help stabilize markets, he said. At the same time, he cited some anecdotal evidence of sovereign funds investing in other funds, such as hedge funds, that multiply their impact through borrowing. Leveraging can destabilize markets when bets go wrong.
The global value of traded securities is about $165 trillion, so $3 trillion in sovereign funds is not yet a major concern, he wrote. But if the figure rises to $10 trillion, and if many funds do employ leverage, the funds will bear watching, he added.
The Peterson Institute's Truman advocates "a quantum increase in transparency and accountability" for sovereign funds. At a minimum, he says, the funds should publish annual reports detailing investment strategies and holdings. This fall, the U.S. Treasury Department called on the IMF and World Bank to develop a "best practices" guideline for sovereign funds.
Allen, Herring and Marston agree that greater transparency would be good. But Herring notes that such requirements would not be easy to impose: "It's hard to see how you get compliance with so-called 'voluntary' guidelines when the people who are making the investment decisions are really not involved in putting together the guidelines."
Published: December 12, 2007 in Knowledge@Wharton