Sovereign Wealth Funds Take a Big Hit

[Joanne98]

Friday January 2, 8:08 am ET
By Stanley Reed


Just a few months ago political leaders worldwide were fretting mightily over the growing power of sovereign wealth funds, those vast pools of government-controlled cash in oil-rich countries and other big exporters. The fear was that they would gobble up trophy assets and start to demand a say in running businesses. But as the past year's market turmoil has hit the funds hard, those worries are fading.

While the funds are cagey about what they own -- and what they've lost -- it's certain that they have suffered. One that does report numbers, Norway's $300 billion Government Pension Fund-Global, was down 7.7% in the September quarter. It was the worst performance in the 18-year history of the fund, which invests Norway's oil revenues. And that drop doesn't include more recent market woes. All told, the sovereign funds have lost 18% to 25% this year, estimates Stephen Jen, an economist at Morgan Stanley (NYSE:MS - News) in London. That means losses of as much as $700 billion, bringing the funds' total value down to some $2.4 trillion. "You don't lose a quarter of your assets without consequences," Jen says.

Those consequences will probably include closer scrutiny by the funds' boards. Coupled with other troubles, such as steep drops in their domestic stock markets and potential bailouts of local companies, at least some of the funds have come under pressure to spend at home rather than abroad. Kuwait's government, for instance, has asked its fund to pump money into the local bourse, which has fallen sharply. With the global credit squeeze, "the average Kuwaiti or Abu Dhabian can't get a mortgage or a car loan," says one Mideast banker. "They wonder why (the funds) are bailing out the Citigroups of this world."

http://biz.yahoo.com/bizwk/090102/0902b4115044767289.html?.v=2

[unlawflcombatnt]

1. The S & P lost almost 40% this year

So these sovereign wealth funds with 18-25% losses have done far better.

[formercia]

2. No benefit from peak oil.

I noticed the funds lost a lot more in the market than they gained for $150 a barrel oil.

[scholarsOrAcademics]

3. Fed qualify as Soverign Fund?

It is using the protection of 'Trade Secrets' as excuse for secrecy. Are we going to have to learn Patent Law?
The Fed is becoming a central authority, it seems.