SWFs: Follow The BIG Money…

6th largest economy_SWF RussiaRussia is the 6th largest economy in the world.
See More: http://rdif.ru/Eng_Numbers/

Sovereign Wealth Funds (SWF)

The Russian Direct Investment Fund (RDIF) is a $10 billion [SWF] fund established to make equity investments primarily in the Russian economy.

In all of its investments, the fund is uniquely mandated to secure co-investment that as a minimum matches its commitment – thus acting as a catalyst for direct investment into Russia.

RDIF together with its co-investors invested and committed over $7 billion for this purpose, of which RDIF alone invested $1.3 billion and over $6 billion came from blue chip international co-investment partners.

RDIF also attracted over $15 billion of foreign capital into the Russian economy through long-term strategic partnerships.

The fund was created in 2011 under the leadership of the President and Prime Minister of the Russian Federation and is managed by a highly qualified team of private equity investment professionals with broad international and Russian experience.

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Temasek

is an investment company [SWF] based in Singapore with a multinational staff of 490 people; portfolio is S$223 billion and is focused primarily in Asia

Temasek-140530-1.jpgLeft: Temasek CEO Ho Ching shakes hand with South Korean President Park Geun-hye

 (Top) President Park Geun-hye (right) receives Temasek CEO Ho Ching (second from left) and Chairman Lim Bun Heng (third from left). (Bottom) President Park Geun-hye (left) discusses mutual cooperation with Temasek executives. (photos: Cheong Wa Dae)

(Top) President Park Geun-hye receives Temasek CEO Ho Ching (second from left) and Chairman Lim Bun Heng (third from left). (Bottom) President Park Geun-hye (left) discusses mutual cooperation with Temasek executives. (photos: Cheong Wa Dae)

President of South Korea, Park Geun-hye, met with executives from Temasek Holdings, Singapore’s sovereign wealth fund, and discussed expanding the fund’s investments in Korea and other matters of mutual interest.

“I am glad that the Temasek Connection conference is being held in Korea this year, after it was postponed last year due to the deterioration of South Korea-North Korea relations,” said President Park in a meeting at Cheong Wa Dae on May 27. “I hope the conference will be a good chance to understand Korean industries and culture, and to find new opportunities for investment in areas with high growth potential.”

President Park also expressed her gratitude to Temasek for investing in promising Korean startup companies and small- and medium-sized enterprises. “Korea has a competitive edge in automobiles and IT industries, as well as creative industries, such as music and television. Thus, there are many companies in which Temasek could be interested in investing,” the president added.

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Below is a curious research paper:

Barriers to Long-Term Cross-Border Investing: A Survey of Institutional Investor Perceptions


Rachel Harvey

Committee on Global Thought, Columbia University

Patrick Bolton

Columbia Business School – Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Laurence H. Wilse-Samson

Columbia University

Li An

Tsinghua University – PBC School of Finance; Columbia University

Frédéric Samama

SWF Research Initiative, Amundi – Credit Agricole Group

September 17, 2014

Rotman International Journal of Pension Management, Vol. 7, No. 2, 2014
Abstract:
Because of market failures, domestic investment resources are often insufficient to fully finance the public and private capital formation critical to global wealth preservation and growth. It is thus important to understand the factors that drive cross-border investments, including the potential fit between the objectives of international long-term investors and public policy objectives. This article reports the results of a survey of such investors.

This research revealed that foreign policy factors were most likely to affect cross-border investment decisions; other influential factors included organizational issues.
The survey also found a surprising gap between the responding funds’ aspiration to be long-term investors and their apparent willingness and/or ability to implement long-term investment strategies. These findings highlight the importance of a facilitative policy environment for understanding the benefits of, and implementing, long-horizon cross-border investments.

Number of Pages in PDF File: 11
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https://philosophyofmetrics.files.wordpress.com/2014/09/finalvision_sovereign_wealth_funds.pdf
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2 comments on “SWFs: Follow The BIG Money…
  1. RonMamita says:

    Bank of China (Hong Kong) partners with UnionPay International to pioneer the RMB Settlement Service of UnionPay Card for Hong Kong Merchants

    04 Dec 2013 Via: http://www.bochk.com/web/about/press_release/press_release_details.xml?section=about&level_2=press_release&fldr_id=32042&selFldr=32042&pfid=84&cid=61326

    Bank of China (Hong Kong) ( “BOCHK” ) and UnionPay International today jointly announced to pioneer the RMB settlement service of UnionPay Card for merchants in Hong Kong. In addition to providing RMB settlement service for the merchants accepting payments made by UnionPay cards, this initiative will further promote the development of cross-border settlement in RMB and enhance the competitive advantages for Hong Kong merchants.

    The launch ceremony was officiated by Mr Niu Xiaomin, Deputy President of the People’s Bank of China ( “PBOC” ) Guangzhou Branch; Mr Esmond Lee, Executive Director (Financial Infrastructure) of the Hong Kong Monetary Authority; Mr Cai Jianbo, CEO of UnionPay International; Mr Jason Yeung, Deputy Chief Executive of BOCHK; and Mr Dickson So, General Manager of BOC Credit Card (International) Limited ( “BOC Credit Card” ).

    BOC Credit Card is the acquirer of the RMB settlement service of UnionPay Card for merchants in Hong Kong. Sa Sa International Holdings Ltd, Chow Tai Fook Jewellery Co. Ltd, Sogo Hong Kong Co. Ltd, Oriental Watch Group and Yue Hwa Chinese Products Emporium Ltd are among the first batch of participating merchants of the service. They will be able to settle their HKD transactions in HKD or RMB conveniently to save the time required for conversion at banks.

    During his address at the ceremony, Mr Cai Jianbo, CEO of UnionPay International, said, “The RMB settlement service launched by UnionPay International and BOCHK for Hong Kong merchants has opened up a direct channel for acquiring the currency and thus reduces exchange losses. As a result, merchants would be more willing to accept the UnionPay RMB Card, providing better services for the cardholders who wish to acquire and use RMB. Moreover, this new business, which involves circulation and settlement of RMB as the single currency with the UnionPay Card, facilitates the internationalisation of RMB. It also helps expand Hong Kong’s RMB capital pool and promote the development of the offshore RMB business. Through its new offering, UnionPay International will continue to further support Hong Kong acquirers in innovating RMB services, presenting more opportunities to local merchants who accept the UnionPay cards.”

    Mr Jason Yeung, Deputy Chief Executive of BOCHK, said, “BOCHK takes great pleasure in joining hands with UnionPay International to pioneer the RMB settlement service of UnionPay Card for merchants in Hong Kong. In line with the Circular concerning the Simplification of Cross-border RMB Procedures and Improvement of Relevant Policies issued by PBOC in July this year, this initiative will promote the use of RMB by banks, financial institutions and corporations as well as further enhance the efficiency of RMB cross-border settlement. The service will help strengthen the competitiveness of Hong Kong as an offshore RMB business centre and boost growth in cross-border flow of visitors, commodities and capital given the increasingly closer economic ties between Hong Kong and the Mainland.”

    UnionPay International possesses comprehensive service capability in the international credit card market while BOCHK enjoys unique competitive edges in the offshore RMB business. By combining the strengths of both strong franchises, this innovative service helps meet the growing needs for cross-border settlement in RMB. Over 11 million UnionPay cards have been issued by card issuance institutions in Hong Kong, including BOC Credit Card.

    As the market leader in the RMB business in Hong Kong, the BOCHK Group has the most extensive service networks, a diversified range of RMB products and services, a proven track record of cross-border trade and settlement, as well as a strong professional team with sound knowledge of the financial policies and regulations of both Hong Kong and the Mainland markets. Capitalising on its close collaboration with its parent, Bank of China, the BOCHK Group provides quality and professional RMB services to its customers.

    For more details on the RMB settlement service of UnionPay Card provided by BOC Credit Card for Hong Kong merchants, please call its Merchant Business Development Hotline at (852) 2853 8702.

    – End –

    About Bank of China (Hong Kong) Limited

    Bank of China (Hong Kong) Limited ( “BOCHK” ), established on 1 October 2001, is a leading listed commercial banking group in Hong Kong. With over 260 branches, more than 580 ATMs and other distribution channels in Hong Kong, BOCHK and its subsidiaries offer a comprehensive range of financial products and services to individual and corporate customers. BOCHK is one of the three note issuing banks in Hong Kong. In addition, the BOCHK Group (comprising BOCHK, Nanyang Commercial Bank and Chiyu Banking Corporation) and its subsidiaries have 41 branches and sub-branches in the Mainland of China to provide cross-border banking services to customers in Hong Kong and the Mainland. BOCHK is appointed by the People’s Bank of China as the Clearing Bank for Renminbi business in Hong Kong. On 13 July 2010, BOCHK was authorised as the Clearing Bank of RMB banknotes business for the Taiwan region.

    BOC Hong Kong (Holdings) Limited, BOCHK’s holding company, began trading on the main board of the Stock Exchange of Hong Kong on 25 July 2002, with stock code “2388” , ADR OTC Symbol “BHKLY”.

    About BOC Credit Card (International) Limited

    BOC Credit Card (International) Limited ( “BOC Credit Card” ) was established in 1980 and is a wholly-owned subsidiary of BOCHK. All credit cards issued by BOC Credit Card are collectively called BOC Credit Cards. BOC Credit Card has issued various international credit cards and revolving loan cards, and is now the card issuing and acquiring processing centre for BOCHK and its subsidiary banks (Nanyang Commercial Bank and Chiyu Banking Corporation), as well as other institutions and organisations. BOC Credit Card plays an important role in the credit card business in the Mainland of China, Hong Kong and Macau.

    BOC Credit Card provides a wide variety of products to serve different market needs. Its product family includes the Visa Infinite, Visa and MasterCard Platinum Card, Titanium Card, Gold Card, Classic Card, Business/Corporate Card, Purchasing Card, Co-branded Card (with over 20 co-branding corporations and organisations), Intown Virtual Credit Card, BOC CUP Dual Currency Credit Card and BOC Express Cash Card. It also took the lead in launching the UnionPay Card Payment Service in Hong Kong in January 2004.

    About UnionPay International

    UnionPay International is a subsidiary focusing on international business of UnionPay. Unionpay International defines Membership Scheme to be the basis for development of the worldwide UnionPay Card acceptance network; promotes the international issuance and usage of the UnionPay Card as well as other innovative payment solutions and enhance the international brand position of UnionPay. By cooperation with over 200 associations worldwide, the UnionPay international network has enabled the UnionPay Card acceptance in over 140 countries and regions to date. UnionPay cards have been issued in above 30 countries and regions. UnionPay International provides quality, efficient and secure cross-border payment services to the world’s largest cardholders group; and provides convenient and localized service to the increasing overseas UnionPay cardholders.

  2. RonMamita says:

    Another Conspiracy Theory Becomes Fact: The Fed’s “Stealth Bailout” Of Foreign Banks Goes Mainstream

    Back in June 2011, Zero Hedge first posted:

    which we followed up on various occasions, most notably with

    With the following key chart:

    Of course, the conformist counter-contrarian punditry, for example the FT’s Alphaville, promptly said this was a non-issue and was purely due to some completely irrelevant microarbing of a few basis points in FDIC penalty surcharges, which as we explained extensively over the past 3 years, has nothing at all to do with the actual motive of hoarding Fed reserves by offshore (or onshore) banks, and which has everything to do with accumulating billions in “dry powder” reserves to use for risk-purchasing purposes (alas understanding that would require grasping that reserves are perfectly valid collateral to use as margin against purchase of such market moving products as e-mini futures, which in turn explains why traders usually don’t end up as journos).

    Fast, or rather slow, forward to today when none other than the WSJ’s Jon Hilsenrath debunks yet another “conspiracy theory” and reveals it as “unconspiracy fact” with “Fed Rate Policies Aid Foreign Banks: Lenders Pocket a Spread by Borrowing Cheaply, Parking Funds at Central Bank

    Wait… the Wall Street Journal said that? Yup.

    Banks based outside the U.S. have been unlikely beneficiaries of the Federal Reserve’s interest-rate policies, and they are likely to keep profiting as the Fed changes the way it controls borrowing costs.

     

     

    Foreign firms have received nearly half of the $9.8 billion in interest the Fed has paid banks since the beginning of last year for the money, called reserves, they deposit at the U.S. central bankaccording to an analysis of Fed data by The Wall Street Journal. Those lenders control only about 17% of all bank assets in the U.S.

     

    Moreover, the Fed’s plans for raising interest rates make it likely banks will see those payments grow in coming years.

    Hmm, we almost feel like we should bring up the dreaded “P” word considering the bolded sentence is a recap of what we said in February of 2013 in “How The Fed Is Handing Over Billions In “Profits” To Foreign Banks Each Year.” That’s ok, though: imitation, flattery and all that…

    So here is Hilsy “figuring out” what we have been explaining for over 3 years!

    Though small in relation to their overall revenues, interest payments from the Fed have been a source of virtually risk-free returns for foreign banks. Large holders of Fed reserves include Deutsche Bank, UBS AG, Bank of China and Bank of Tokyo-Mitsubishi UFJ, according to bank regulatory filings. U.S. banks including J.P. Morgan Chase, Wells Fargo and Bank of America Corp. are also big recipients of Fed interest payments, according to the filings.

     

    “It is a small transfer from U.S. taxpayers to foreign taxpayers,” said Joseph Gagnon, a former Fed economist at the Peterson Institute for International Economics. The transfer, he added, was a side effect of Fed policy, not a goal.

    Actually it is a goal, but that would lead to a whole lot of embarrassing congressional hearings which the Fed would rather avoid, plus nobody really “gets” it. The reason why? Apparently things are so “complex” that anyone who figured it out years ago was clearly a conspiracy theorist:

    Behind the payments is a complex interplay between new government regulatory policies and new methods the Fed has developed to control short-term interest rates.

     

    The Fed has pumped nearly $3 trillion into the banking system since the 2008 financial crisis, increasing banks’ reserves, in efforts to stabilize markets and boost economic growth.

     

    Since 2008, it has paid banks interest of 0.25% on those reserves. The Fed affirmed this month that the rate it pays on reserves will be the primary tool it uses to raise short-term borrowing costs from near zero when the time comes, likely next year.

     

    In part because regulatory requirements discourage domestic banks from holding more cash reserves than they need, many of the reserves created by the Fed are held by foreign banks.

    In other words, the Fed-funded risk-free carry trade finally goes mainstream. Of course, all those who read ZH in 2011 will know all of this by now:

    The interest payments totaled $4.7 billion so far this year and $5.1 billion last year, and will increase over time as the Fed raises rates. The Fed remits most of its profits to the U.S. Treasury, and the rising cost of the interest payments could put downward pressure on the amount the central bank sends to taxpayers each year, the Fed has said.

     

    Some observers say this could become a political challenge for the Fed, especially the payments it makes to foreign banks.

     

    “The fact is that the Fed is going to be paying very large amounts of interest to banks,” said William Poole, a senior fellow at the Cato Institute and former president of the Federal Reserve Bank of St. Louis. “It’s highly likely that some politicians will notice that and given the proclivity of some politicians anyway to demagogue issues, the Fed is going to have some political explaining to do.”

     

    Some Fed officials also have expressed concern about how these payments will look. “I think the optics are very difficult to defend and might get us into trouble,” James Bullard, president of the Federal Reserve Bank of St. Louis, said in an August interview with MarketWatch.

     

    Since 2009, foreign banks have earned roughly $5 billion by borrowing dollars cheaply, often at less than 0.10%, in short-term funding markets and depositing those funds at the Fed for 0.25%, according to the Journal analysis. That estimate doesn’t take into account the costs of raising money through other means, overhead and taxes, which affect net income.

    But don’t blame the banks – they are merely doing what the Fed is encouraging them to do. And after all who wouldn’t collect billions in risk free cash?

    A spokeswoman for one bank engaged in the trade, Bank of Tokyo Mitsubishi, said that the growth of excess reserves parked at the central banks is a natural consequence of the Fed’s policy. “The share of excess reserve balances held by BTMU has been in alignment with its business footprint in the U.S.,” she said.

     

    Deutsche Bank, which had one of the largest reserve balances at the Fed as of June 30, declined to comment. UBS didn’t respond to requests for comment. A Chinese official close to Bank of China said it has been parking funds at the Fed in order to help it comply with liquidity requirements in its home market.

     

    The foreign banks’ activity is “entirely legitimate because they are providing a financial service and they are taking a spread,” said Lou Crandall, chief economist at research firm Wrightson ICAP.

    Sadly, the WSJ ends just before it gets good. So without further ado, here is what happens if and when one extrapolates a rising rate environment in terms of Fed handouts to foreign banks, from what we said in February of 2013:

    We show the surge in the foreign bank cash level, as well as the cumulative cash interest paid to these banks assuming a weekly cash interest payment. What the chart shows is that from December 2008 through the last week of January, the Fed has paid out some $6 billion in cash (red line) to European banks simply as interest on excess reserves.

     

     

    But that’s just the beginning. If we are correct in assuming that QE3 will be a replica of QE2 when all the new reserves created ended up as cash on foreign bank balance sheets, it means that we can quite accurately forecast what the total foreign bank cash position will be on December 31, 2013 (as the Fed will certainly not end its open ended monetization of the US deficit before then, or likely, ever). The result: just under $2 trillion in cash held be foreign banks operating in the US, which also means that in calendar 2013, the Fed will fund and subsidize foreign banks a blended interest payment of $3.5 billion! This is entirely separate from the $2 trillion liquidity subsidy that Bernanke will also have handed out to keep these banks afloat, and is $3.5 billion that will flow right through the P&L and end up in the pockets of offshore shareholders who otherwise would very likely be wiped out had it not been for the Fed’s relentless efforts to bailout foreign banks.

     

     

    And since it is improbable that excess reserves held by any banks will decline at all in the coming years, one can also assume that the annualized interest paid to foreign banks, which would amount to at least $5 billion pear year, every year, will continue indefinitely as a direct Fed subsidy to the bottom line of Foreign banks.

     

    All of this, of course, ignores what happens should the Fed hike interest rates across the board, which will also mean rising the rates on IOER, once inflation finally strikes: simple math means a 1% IOER means some $20 billion in interest paid to foreign banks, 2% – $40 billion, 5% – $100 billion paid to foreign banks, and so on. Putting these numbers in perspective, let’s recall that Italy’s third largest bank just got a €3.9 billion bailout (its third), and has a market cap of some €2.9 billion.

     

    We can only hope someone in Congress asks Ben Bernanke in two weeks just under which Fed charter it is that the Fed is more focused on generating profits (not just trillions in excess liquidity) for European banks, than on opening up consumer lending which has been stuck in “petrified” mode for the past 4 years, with the total amount of loans outstanding currently at all US banks – foreign and domestic – at levels last seen the week Lehman filed for bankruptcy.

    Obviously, nobody asked Bernanke and nobody has asked Yellen this simple question, because until last night apparently nobody aside from the Zero Hedge community had any grasp of what is going on.

    That said, we doubt that anyone in control will ask any related questions in the near of not so near future even with Hilsenrath’s “How The Fed Is Bailing Out Foreign Banks For Dummies” primer, because let’s not forget – the same banks that control the Fed are also the same banks that purchase politicians at every possible opportunity (see for example: With Cantor Down, Which Other Politicians Has Goldman Invested In?).

    In fact, the only good news from Hilsenrath’s report is that yet another conspiracy theory has been documented as unconspiracy fact. Then again, Zero Hedge readers knew all of this over three years ago, for free.

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