Recent comments by QIA Board member Hussain Al Abdullah on the subject of the QIA's strategy:
"(It) is simple: we
are opportunistic. If there is an opportunity in France, we will go to
France. If there is an opportunity in Rwanda, we will go to Rwanda.
"We have no asset
allocation or geographic allocation. After the financial crisis, all
that went in the garbage. Today, it is very difficult for us to see
forward. We cannot see more than three months forward."
Interestingly, this shift in strategy is something my friend Gordon Clark and I (Ashby Monk) wrote about in a 2010 paper entitled “Sovereign Wealth Funds: Form and Function in the 21st Century”. Let me share some blurbage with you to highlight the effect:
“Accordingly, we
foresee an eventuality whereby SWFs, cognizant of the fact that western
markets no longer offer a reliable investment risk premium, will evolve
into different institutions in the coming decades. In effect, we
envision SWFs transforming themselves into long‐term investors whose
holdings are selected on the basis of their strategic interests (of the
fund and the nation) rather than the principles underpinning modern
portfolio theory. If so, the future of SWFs will be more like that
feared by their critics in the west than the ideal form argued to be
consistent with a symbiotic relationship with the west. The costs of
this transformation will be felt by global financial markets as
liquidity ebbs away and SWFs make their own ways in the world of
economic development rather than market arbitrage and speculation.”
In short, as SWFs (and
other long-term investors) grow increasingly disenfranchised with the
high costs, low returns and misaligned interests embedded in the
traditional, western institutions of finance, SWFs may evolve
towards new methods and mechanisms for deploying capital.
This is an interesting piece on how not just SWF but all major endowments may behave if they have a broad mandate.
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