Monday, April 07, 2008

Sovereign Wealth Fund Investments

There is much controversy and criticism with regards to investments in United States bonds and stocks by sovereign wealth funds. These funds are government operated investment accounts which invest in the assets of other countries. These assets can include government bonds, stocks, and real estate. The concerns are the lack of transparency and the possible abuse of control of the investments, especially relating to certain countries such as China, Russia, and the Middle Eastern states.

The Treasury Department estimates that there is as much as $2.5 trillion in sovereign wealth fund assets. The following are some of the major sovereign investments in American and European stocks.

The China Investment Corporation made a $3 billion investment in the Blackstone Group (BX), the private equity and investment advisory company. China Investment Corporation, which was featured on 60 Minutes on Sunday night, has about $200 billion in assets. Blackstone has a PE of 13, a PEG of 1.04, and a yield of 6.8%.

China also took a 9.9% interest, amounting to $5 billion, in the large investment firm Morgan Stanley (MS). The stock has a PE of 29, a PEG of 0.69, and a yield of 2.2%.

China's State Administration of Foreign Exchange, which may be considered a competitor to the China Investment Corporation, took a 1.6% interest, costing $1.8 billion, in Total SA (TOT), the French oil and gas company. The stock has a PE of 8, a PEG of 1.91, and a yield of 4.1%.

The Kuwait Investment Authority, the Abu Dhabi Investment Authority, and the Government of Singapore Investment Corporation have investment interests in Citigroup Inc. (C). The stock has a PE of 34, a PEG of 1.71, and pays a yield of 5.3%.

The Korea Investment Corporation, Singapore's Temasek, and the Kuwait Investment Authority have invested the convertible preferred stock of Merrill Lynch (MER). Merrill has a forward PE of 8, a PEG of 1.45, and a yield of 3.1%.

Barclays plc (BCS), the British banking and financial services company, is partially owned by China Development Bank and Singapore's Temasek. The stock has a PE of 7, a PEG of 0.66, and a yield of 8.9%.

The Qatar Investment Authority's Delta Two Fund has more than a 25% ownership in J Sainsbury (JSAIY.PK), the British supermarket chain.

Temasek owns 12% of Standard Chartered (SCBFF.PK), the British banking company.

The London Stock Exchange (LDNXF.PK), one of the oldest surviving stock exchanges in the world, is 23.8% owned by the Qatar Investment Authority. The stock has a PE of 22.

Author does not own any of the above.

By Fred Fuld at

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