About Sovereign Wealth Funds
Posted on Wednesday, September 5th, 2007 | In Current Market NewsI have written a couple of other posts about sovereign wealth funds (here and here). Nouriel Roubini had a post on the subject the other day that is a good read.
There is an obvious path to something going wrong at one of these funds, and there will be more of them in the future, at some point that will cause a market event. This is not a prediction of when but new market participants with a lot of capital at their disposal will add up to a problem. Realistically these are so new that this is not a threat to worry about now.
These funds come about as a function of prosperity of some sort. It seems like most of them have to do with natural resources but not all (Singapore as an example). A country in the position of having a healthy and growing SWF is probably a good choice for an investment destination for a diversified portfolio.
As I have disclosed, clients own Norway and Australia across the board, I have Russia for a few clients and although I have been out of China for a while I expect to be back in within a year. In the big picture these destinations all have investment merit but in the interest of being really diversified I have exposure to all sorts of countries with different attributes an vulnerabilities.
The deficit countries would seem to be at the opposite end of this spectrum and they too have investment merit. When risk is in vogue these countries have a chance of beating the surplus countries. The deficit countries include New Zealand, Hungary, Turkey and Iceland but there are others.
I think it is very important, for people inclined to pick countries, to have a diverse mix. It might not be much help in a given month of panic but I believe this approach will add a lot of value when there are more serious, slower declines in the US.
Last 5 posts by Roger Nusbaum
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 About Roger Nusbaum (http://randomroger.blogspot.com)
Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog, which has been profiled in several top business publications, including Barron's and Forbes. Nusbaum has also been a financial consultant with Morgan Stanley, an investment counselor with Fisher Investments and an institutional equities and options trader with Charles Schwab. He holds a bachelor's degree in economics from San Diego State University |
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