Sovereign Wealth Funds A Growing Global Force.ppt

Sovereign Wealth Funds: A Growing Global Force Sovereign Wealth Funds: A Growing Global Force Sovereign Wealth Funds (“SWFs”) are a prominent investor class with their assets rivaling Global Hedge Funds and Private Equity combined Not all SWFs are created equal as they lie along a spectrum of risk appetite SWFs are hiring best-in-class investment talent to serve long-term investment goals Governments are weighing perceived threats of SWFs against potential benefits. Managing political risk in SWF-related transactions is key SWFs are Big and Getting Bigger SWFs: Increasingly Relevant Assets Under Management ($ b) Foreign Inflows Keep Treasury Yields Low McKinsey estimates that annual net foreign purchases lowered long rates by 130 basis points SWFs are in Increasingly High Profile Transactions Recapitalizing the Financial Service Industry Where the Wealth is Coming From Where the wealth is coming from and how will it grow? Surge in commodity prices Dramatic increase in current account surpluses in Asia Willingness of governments to allocate more funds from Foreign Exchange Reserves to Sovereign Wealth Funds 2007 $3.0 trillion 2012 $7.5 - $10.0 trillion Commodity Producing Countries Generate Investment Assets At oil prices of $100/barrel, there is an incremental $2.3 b petrodollar investment into the world markets per day. SWFs: Not a New Concept Where Is Sovereign Wealth Managed? Activity Is Moving to the Aggressive End of the Spectrum SWF Capital Can Reshape Global Economic Landscape SWF Strategic Implications for Citi Clients Governments Are Weighing Their Response to SWFs February 22, 2008 Fran?ois Bujon de l’EstangChairman, Citi France Citi is playing a central role in the intermediation of these capital flows. 1 Global Financial Assets ($ T) 2 * * ADIA. 3 Warnock Model (1) Warnock Model (2) Source: McKinsey Global Institute: “The New Power Brokers: How Oil, Asia, Hedge Funds and Private Equity are Shaping Global Capital Markets,” Oct. 2007.