The Russians Are Coming
Last Friday Russia became the latest country to launch a Sovereign Wealth Fund (SWF). At USD32 billion the fund is not a bog one but expect it to grow to more than a USD100 billion in the not so distant future.
The Russian government has made clear that initially its SWF will invest very conservatively, mainly in foreign debt and foreign bank deposits. This is to be expected from a new SWF, as the same route was followed by other, more mature now, SWFs when they were in their beginnings. But as time passes and the fund matures, I expect diversification in riskier assets.
The Russian SWF comes as an addition to the existing SWFs that have been acting as an unofficial rescue squad for the for the world’s financial system, as I noted here a couple of weeks ago.
David Rubenstein, the Carlyle Group co-founder, recently added a new dimension to the usefulness of the SWFs, when at the World Economic Forum annual meeting in Davos said that “Sovereign wealth funds have enormous amounts of money, they buy fixed-income instruments as well as equity, and it's quite possible they can provide debt for some of these large buyouts if they chose to do so.”
He also hinted that a lot of private equity firms are looking into establishing positions in emerging markets assets as well as other assets around the world that that are “artificially depressed.”
The game is afoot
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