SWFs Keep Moving on the Summer of 2015

August 24, 2015 by Loch Adamson

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Abu Dhabi funds don’t stop in the sweltering summer heat and keep reshuffling their board memberships. London’s Mayor Boris Johnson talks big about a $100 billion "citizens’ fund." The Libyan Investment authority launches into another legal action. Will Papua New Guinea have an operational sovereign wealth fund anytime soon?  

Changes at ADIC subsidiary

After appointing the crown prince Sheikh Mohammed bin Zayed al-Nahyan as the new chairman of the Abu Dhabi Investment Council (ADIC) last June, the fund announced a change at the top of its private equity-focused subsidiary Invest AD in August. The unit announced that Khalifa Sultan al-Suwaidi, ADIC's director of direct investments, was taking over as interim CEO following on the departure of Nazem al-Kudsi after seven years with the company. 

Al-Kudsi has joined Abu Dhabi-based venture capital firm Emirates International Investment Co., a unit of National Holding, one of the emirate's largest conglomerates. Invest AD has also lost its CIO David Sanders according to press reports.

IPIC's Aabar Appoints New CEO

Another Abu Dhabi sovereign fund made high-profile changes in August. Aabar Investments, the financial investment arm of the International Petroleum Investment Co. (IPIC), has named its head of investment evaluation and execution, Mohamed Hamad al-Mehairi, as new CEO after eight years at the fund. Mohamed Badawy al-Husseiny, who led Aabar for the past five years, has left to join Dubai-based private equity firm Trussbridge Advisory.

In April, IPIC replaced its former CEO Khadem al-Qubaisi amid accusations of using Luxembourg-based shell companies to secure deals with Spanish companies owned or connected to IPIC. 

Papua New Guinea Passes SWF Bill

The Papua New Guinea parliament has finally passed legislation that defines how to manage and finance its sovereign wealth fund, five years in the making. The bill instructs the government to direct a portion of the proceeds from the country’s liquefied natural gas industry to the fund, which has  a mandate to build intergenerational savings and stabilize the economy. 

The island nation's parliament started planning the fund in 2010, but only approved laws in 2012 to collect revenue from a massive liquefied natural gas project being developed by U.S. oil and gas giant ExxonMobil in a dedicated fund. The government initially had promised to transfer all the proceeds from the LNG project when exports began in 2014 — up to $30 billion in total, according to some estimates — but political disagreements emerged. 

In February 2014, Treasury Minister Don Polye sought to clarify the matter by issuing a public statement pushing for the fund to be operative by May 2014 under a revised piece of legislation. In March 2014, however, the government revealed a new plan, pledging the first tranche of LNG revenue as collateral for a $1.3 billion loan from Zurich-based bank UBS. The government used the proceeds to buy back a 10.1 percent stake in Oil Search, the local company managing a second LNG project, from Abu Dhabi’s fund IPIC. 

In February 2015, Prime Minister Peter O'Neill assured the populace that the fund would be ready by the end of March 2015, but no one yet knows when it will be fully operational.

London Mayor Boris Johnson Unveils Plans for "Citizens' SWF"

London's Mayor Boris Johnson has appointed Edmund Truell, chairman of the London Pensions Fund Authority, as a new adviser for pensions and investments. Truell’s mandate is to create a $100 billion sovereign-like vehicle merging the London fund with two of the largest pension funds in Northern England: the Greater Manchester Pension Fund and the Lancashire County Pension Fund. 

The London Pensions Fund already has a £10 billion ($15.7 billion) partnership with the Lancashire County Pension Fund, which it set up in December 2014, and a £500 million ($780 million) infrastructure fund that it organized with its Greater Manchester peer. 

The British local government pension funds are fragmented and some commentators have long advocated combining them to form a larger unit to save on management fees — and achieve sufficient scale to insource some of their investments, much like several Canadian pension-fund peers. Truell expects the quasi-sovereign fund to follow an endowment-style investment strategy with 50-50 split between private and public markets.

LIA Takes Legal Action Over Nationalizations

The Libyan Investment Authority (LIA) is reportedly launching another legal action. Hassan Bouhadi, chairman of the LIA faction backed by the internationally-recognized government based in the city of Tobruk in eastern Libya, said the fund will be forced to take legal action against the governments of four African countries that  took advantage of Libya's civil war to nationalize some of the fund's assets.

Chad, Niger, Rwanda and Zambia have reportedly nationalized local telecom and technology companies in LIA’s portfolio. The fund still has 25 percent of its $67 billion in assets frozen under international law as civil war rages in the North-African country. 

The conflict has led to the formation of two governments — and two rival management teams — that both claim ownership of LIA. Tripoli-based AbdulMagid Breish also claims to be the fund’s legitimate chairman; Breish claims to be representing Libyan citizens after being reinstated as the fund's chairman by the Libyan Court of Appeal after his removal in July 2014. 

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