Word: sovereigns
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...once burned, twice shy" isn't an old Chinese proverb, it probably should be. As Gao Xiqing, the chief investment officer of China's $200 billion sovereign wealth fund, meets in New York City this week with Morgan Stanley CEO John Mack to discuss increasing the Chinese government's stake in the venerable - and flailing - investment bank, he bears an obvious burden. Last December, the CIC (the China Investment Corp.) invested $5 billion for a 9.9% stake in Morgan Stanley (for which the bank must pay CIC a 9% annual dividend until 2010). On paper, that investment is now down...
...answer, if the recent behavior of other sovereign wealth funds and foreign private equity houses is any indication, may be to deliver, in person, a simple message: No. Not again. Not unless you structure a deal in such a way that we simply cannot lose. Otherwise, goodbye. That, in effect, is what Sameer Al Ansari, the CEO of Dubai International Capital, told Wall Street earlier this summer. He had had discussions "with all the people you'd expect" in the pantheon of U.S. finance regarding a possible investment from his fund, he told TIME. Wisely, it turns out, he told...
...decision a couple of months ago not to invest looks pretty smart today, and it's not clear, despite this week's carnage on Wall Street, that anything has changed significantly. To the extent that sovereign wealth funds are talking to desperate-for-capital bankers in the U.S. - and, as Gao's trip shows, they are talking - the terms of the discussions, one senior Hong Kong-based banker said today, are likely to be very harsh for any potential recipient of capital: "You're basically looking at structuring a deal at this point in which there is no downside - none...
...wildly ambitious real estate and development projects that had become commonplace in the region. "Every day you could open the newspaper and read about new mega-projects worth billions of dollars," says Nazem Al Kudsi, the chief executive officer for Abu Dhabi Investment Co., which is part of a sovereign wealth fund that recently bought New York's Chrysler building. "Today, there are not as many projects in the system...
...Wary sovereign wealth funds from Arab countries aren't likely to rush in to buy the assets of Western financial companies just yet, according to Sfakianakis. Some have already been burned, like the Kuwait Investment Authority, which bought Merrill Lynch shares worth billions earlier this year only to see the stock plummet in recent months. So for now, Arab investors are likely to refocus on infrastructure projects in their own countries that create real value and services for their economies, which are bound to keep growing even in the midst of a Western financial crisis...