Sovereign Wealth Funds in Flux

June 02, 2015 by Loch Adamson

The battle for control over the Libyan Investment Authority (LIA) continues.
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Malta Courthouse

"Courthouse Valletta, Malta" by Berthold Werner. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Sovereign wealth funds were busy in May. Two Libyan governments are still wrangling for control of their country’s $60 billion investment vehicle, Malaysia’s Khazanah Nasional is hiring new staff at breakneck speed and Central Huijin’s president resigned. Here’s a roundup of last month’s changes.

A Face-Off Over Libyan Assets

The battle for control over the Libyan Investment Authority (LIA) continues. Ongoing civil unrest in the North African country has resulted in two governments, each claiming legitimacy — and the right to control LIA’s $60 billion. In Maltese courts, executives from the so—called "Tobruk LIA" — the internationally—recognized Libyan government — responded to a petition by Tripoli’s national salvation government, or Libya Dawn, to refuse recognition to the directors of the Libya Africa Investment Portfolio (LAP) an LIA subsidiary. LAP jointly owns a number of international assets such as the €46.5 million Vivaldi and Milano Due hotels in Milan with another LIA unit, the Libyan—Arab Foreign Investment Co. (LAFICO). 

In April, Libya Dawn sought Maltese recognition of its designated chairman, Mohsen Ali Derregia, as the legitimate representative of LAP instead of Ahmed Kashadah, the Tobruk–backed representative in Malta. Derregia was the former chairman of the LAP under ousted Libyan prime minister Ali Zeidan.  

It gets more complicated. Hassan Bouhadi, LIA’s current Valletta–based chairman, told British media that he intends to pursue LIA’s suits in U.K. courts against Goldman Sachs Group and Société Générale — alleging they are responsible for a combined $3.3 billion of losses due to illegitimate trades made on the sovereign wealth fund’s behalf in 2008 and 2009. 

In developments regarding those suits, LIA two weeks ago appointed a new legal firm, Keystone Law, after its previous lawyers at Enyo Law in March pulled out of the London proceedings. Bouhaidi is also fighting claims of legitimacy from former chairmen Abdulrahman Benyezza and Abdulmagid Breish. Benyezza, who served in the boardroom until October 2014 as interim CEO and chairman, claims he was still the leader of the fund at the time. He has now relinquished that claim in favor of Breish, his predecessor as chairman. 

More Troubles for KIA

The government of Kuwait has recalled some Kuwait Investment Office (KIO) staff members to investigate their involvement in possible accounting irregularities at the London-based unit of the Kuwait Investment Authority (KIA). A parliamentary committee has accused KIO of making investments without proper due diligence, resulting in losses. 

The Kuwaiti parliament requested a formal inquiry by the State Audit Bureau, the emirate's financial oversight body, into the management of KIA in February and the regulator is investigating KIA's relationship with a number of consulting firms, including at least one local company, Advantage Consulting Co. In April 2014, parliament highlighted several issues with the fund's reporting mechanisms in addition to what it regarded as poor investment decisions, but did not pursue the matter.

Central Huijin President Resigns

Xie Zhichun, who had served for just over a year as president of Central Huijin Investment, the domestic investment unit of China Investment Corp., stepped down on May 31. Media reports  on the 56-year old’s resignation conflict as to whether or not the departure was related to the fund's recent sale of positions in two of the country's big four banks, a move that led to a sharp selloff on the Shanghai Stock Exchange last week.

Central Huijin sold A-shares of China Construction Bank, cutting its holding to 2.14 percent from 5.05 percent, and slightly trimmed its position in Industrial and Commercial Bank of China to 45.89 percent from 46 percent. The benchmark Shanghai Composite Index fell 6.5 percent on Thursday, while the Shenzhen Component Index plunged 6.19 percent.

Alaska SWF CEO Abruptly Retires

The Alaska Permanent Fund Corp. (APFC), the agency that manages the U.S. state's sovereign wealth fund, has announced the immediate retirement of CEO Mike Burns due to health concerns. APFC’s Board of Trustees met via teleconference for a special meeting on June 1 and appointed chief financial officer Valerie Mertz as acting executive director for 30 days, while the Board recruits a permanent replacement.

Khazanah Hiring Spree

Khazanah Nasional, Malaysia’s state-owned investment fund, announced several management changes in May. The fund hired Javier Santiso, former managing director, Global Affairs & New Ventures at Madrid-based telecom giant Telefonica, as executive director of investments for the new London office, the opening of which — its fourth overseas — signals its push to internationalize its portfolio, which is currently focused on local companies.

Khazanah also recruited Chinta Bhagat Bhagat, who will act as its new head of operations for its Mumbai office where he will start next month. Bhagat joined Khazanah from consulting firm McKinsey & Co., where he was managing partner of the Singapore office. Bhagat will also oversee the fund’s regional health care investments.

Omar Siddiq bin—Amin Noer Rashid will rejoin Khazanah as executive director of investments from Kuala Lumpur-based CIMB Group Holdings, a banking company. The state-owned investor also promoted Mohamed Nasri Sallehuddin, previously head of corporate and support services, as executive director at its head office. 

ADIA Turnover

The Abu Dhabi Investment Authority (ADIA) hired John Pandtle as its new head of U.S. Internal Equities department in Abu Dhabi. Pandtle joined the fund from St. Petersburg, Florida-based Eagle Asset Management, where he was a portfolio manager. Pandtle will lead a team of professionals overseeing ADIA's U.S. public equities portfolio, reporting to Gregory Eckersley, global head of internal equities. 

Also on the move: Paul Higginbotham, who has left after nine years as ADIA’s head of external equities, where he oversaw one of the largest externally managed portfolios in the world, to start a London-based investment consulting and advisory firm, Clover Hill Capital.

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