Sovereign Wealth Funds

Transcription

1 Sovereign Wealth Funds Stephen L. Jen Morgan Stanley does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see important disclosures at the end of this report.

2 Sovereign Wealth Funds (SWFs) Country Fund Name Assets Inception Source of (Mlns US$s) year funds Total 2,827,456 UAE ADIA 1/ 875, Oil Norway Government Pension Fund - Global 341, Oil Singapore GIC 1/ 330, Other Saudi Arabia Saudi Arabian funds of various types 1/ 300,000 N/A Oil Kuwait Reserve Fund for Future Generation 250, Oil China State FX Investment Corp. + Hueijing Co. 2/ 200, Other Singapore Temasek Holdings 1/ 159, Other Libya Oil Reserve Fund 50, Oil Algeria Fond de régulation des recettes 42, Oil Qatar Qatar Investment Authority 40,000 N/A Oil, gas US (Alaska) Permanent Reserve Fund 38, Oil Brunei Brunei Investment Authority 30, Oil Malaysia Khazanah Nasional BHD 25, Other Russia Stabilisation Fund 3/ 24, Oil Korea KIC (Korea Investment Corporation) 20, Other Kazakhstan National Fund 17, Oil, gas ROC (Taiwan) National Stabilisation Fund * 15,000 N/A Other Canada Alberta Heritage TF 15, Oil Iran Oil Stabilisation Fund 15, Oil Chile A new SWF based on the Copper Fund 4/ 14, Copper Nigeria Excess Crude Account 11, Oil Botswana Pula Fund 6, Diamonds Oman State General RF 2, Oil, gas Azerbaijan State Oil Fund 1, Oil Venezuela FIEM Oil Canada Fond des générations (Québec) Electricity Trinidad & Tob. Revenue SF Oil Kiribati Revenue Equliz. Fund Phosphates Uganda Poverty Action Fund Aid Oil & gas-related funds 2,054,616 Non-oil related funds 772,840 1/ My guesstimates as of September / Not yet finalised. Will be launched in September Venezuela 4/ The Pension Reserve Fund, FRP, and the ESSF and FEES. Source: Morgan Stanley Research 2

3 SWFs Could Reach US$12 Trillion by 2015 SWFs could exceed official reserves within five years Asian exporters will become much more important owners of SWFs. 12,000,000 10,000,000 Sovereign Wealth Funds US$11.9 trillion 70% 65% 60% 55% Oil Exporting Countries 8,000,000 6,000,000 Official Reserves US$7.9 trillion 50% 45% 4,000,000 Crossover in % 35% Non-Oil Exporting Countries 2,000,000 Now % Now Source: Morgan Stanley Research 3

4 Sovereign Pension Funds Country Fund Name Assets Domestic Foreign (Blns USD) Total $4,357 $3,516 $841 81% 19% US Social Security trust funds 1, % 0% Japan Pension Bureau* 1,623 87% 13% France Fonds de réserve pour les retraites 43 67% 33% Canada Canadian Pension Plan % 40% Régie des Rentes du Québec (RRQ)** 32 82% 18% Australia Age Pension % 84% New Zealand New Zealand Superannuation 10 48% 52% Sweden PPM (Premium Pensions System) 38 41% 59% Norway Government Pension Fund - Global 327 0% 100% Switzerland AVS 36 63% 37% Sources: Various national pensions websites. * Includes the GPIF. **For the RRQ, the weights are the investment weights of the Caisse de dépôt et de placement du Québec (CDP). 4

5 Japan s GPIF Transition Plan of the Government Pension Investment Fund Mar-01 Mar-07 Mar-08 Mar-09 Cumulative Average Change Planned Planned Targeted Change Annual From Transit'l Transit'l Basic Change 2006 to Portfolio Portfolio Portfolio [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [11] [12] [13] Total assets (In Trillions of JPY) % % 100.0% % % Domestic bonds + short-term asset % % 75.8% % % % % Domestic stocks % % 11.1% % % % % Overseas bonds % % 5.7% % % % % Overseas stocks % % 7.4% % % % % Total assets (In Billions of USDs) 1,378 1,339 1,430 1, ,339.0 Domestic bonds + short-term asset 1, , , Domestic stocks Overseas bonds Overseas stocks Memorandum Item: Foreign securities share (Blns of $ % % 13.1% % % % % Sources: GPIF, MoF, Morgan Stanley Research *Includes FLIP bonds, deposits in the Fiscal Loan Fund, and short-term assets. Our estimates are in italics. 5

6 Two-Dimensional Diversification Other Real Estate Private Equities SOVEREIGN WEALTH FUNDS Equities Path A Corporate Bonds Agencies Path C Sovereign Bonds RESERVES USD EUR GBP JPY G4-G10 Emerging Markets 6

7 Diversification Dictated by Market Caps Sovereign Debt Depth and Liquidity of the Markets Of Various Potential Reserve Assets (In percent of total market caps) Sovereign bonds Corporate Debt excluding Equities JGBs MSCI World Equity MSCI World Bond Amounts outstanding Market Value Weights Weights US 34.9% 48% 48.6% 40.0% 49.5% 19.1% Japan 27.1% 0.0% 18.4% 12.8% 10.5% 23.5% EMU 20.5% 28.1% 19.4% 18.3% 15.9% 45.4% Germany 4.4% 6.0% 2.4% 3.8% 3.4% 14.0% France 4.5% 6.2% 4.3% 5.4% 4.7% 8.9% Italy 5.6% 7.7% 4.5% 2.5% 1.8% 8.0% Netherlands 1.1% 1.5% 1.0% 1.7% 1.6% 2.4% Belgium 1.2% 1.7% 0.8% 0.8% 0.6% 2.3% Ireland 0.2% 0.2% 1.2% 0.3% 0.4% 0.4% Spain 1.7% 2.3% 4.2% 2.1% 2.0% 4.9% Portugal 0.4% 0.6% 0.4% 0.2% 0.2% 0.8% Greece 0.9% 1.2% 0.1% 0.4% 0.3% 1.7% Austria 0.4% 0.5% 0.3% 0.4% 0.3% 1.5% Finland 0.2% 0.3% 0.2% 0.6% 0.7% 0.5% U.K. 2.9% 3.9% 0.4% 8.5% 11.4% 5.8% Switzerland 0.4% 0.6% 0.2% 2.8% 3.3% 0.7% Sweden 0.5% 0.7% 0.5% 1.2% 1.2% 0.8% Australia 0.3% 0.5% 2.0% 2.1% 2.5% 0.3% New Zealand 0.1% 0.1% 1.7% 0.1% 0.1% 0.1% Canada 2.4% 3.2% 1.8% 3.6% 3.6% 1.8% Norway 0.2% 0.2% 0.2% 0.6% 0.4% 0.2% Denmark 0.3% 0.4% 0.4% 0.5% 0.4% 0.7% AXJ 5.8% 8.0% 5.4% 5.8% 1.2% 0.1% China 2.8% 3.9% 0.9% 0.6% 0.0% Hong Kong 0.1% 0.1% 0.1% 2.4% 0.8% 0.0% India 1.1% 1.5% 0.1% 1.3% Indonesia 0.2% 0.3% 0.1% 0.2% Malaysia 0.2% 0.3% 0.9% 0.4% 0.0% Singapore 0.2% 0.3% 0.1% 0.6% 0.4% South Korea 1.0% 1.3% 2.8% 0.0% 0.0% Thailand 0.2% 0.2% 0.5% 0.3% EMEA 1.8% 2.5% 0.3% 1.4% 1.5% Czeck Republic 0.3% 0.5% 0.0% 0.1% 0.2% Poland 0.4% 0.6% 0.0% 0.0% 0.8% South Africa 0.3% 0.4% 0.2% 0.9% 0.5% Turkey 0.7% 1.0% 0.0% 0.4% LatAm 2.8% 3.9% 0.8% 2.3% 0.1% Argentina 0.2% 0.3% 0.2% 0.1% Brazil 1.8% 2.5% 0.1% 1.5% Mexico 0.8% 1.0% 0.6% 0.7% 0.1% 7

8 Changes in asset prices Based on our back-of-a-large-envelope calculations, we estimate that the emergence of SWFs could, ceteris paribus: Push up safe bond yields over the next ten years by 30-40bps Drive down the required average return on equities by 50-70bp Reduce the equity risk premium by bps. Raise the P/E ratio by 5-10%. These are not small effects. If investors come to recognize that this will happen the price adjustment could come far faster than the actual rise in SWFs 8

9 Outstanding Issues Risk Tolerance Mandate and Independence Talent Transparency Reciprocity Financial Protectionism Exchange Rate Policies The IMF 9

10 Biography 10

11 Important US Regulatory Disclosures on Subject Companies The information and opinions in this report were prepared by Morgan Stanley & Co. International Limited and its affiliates (collectively, "Morgan Stanley"). The research analysts, strategists, or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues. Stock Ratings Different securities firms use a variety of rating terms as well as different rating systems to describe their recommendations. For example, Morgan Stanley uses a relative rating system including terms such as Overweight, Equal-weight or Underweight (see definitions below). A rating system using terms such as buy, hold and sell is not equivalent to our rating system. Investors should carefully read the definitions of all ratings used in each research report. In addition, since the research report contains more complete information concerning the analyst s views, investors should carefully read the entire research report and not infer its contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor s decision to buy or sell a stock should depend on individual circumstances (such as the investor s existing holdings) and other considerations. Global Stock Ratings Distribution (as of December 31, 2004) Coverage Universe % of Stock Rating Category Count Total Investment Banking Clients (IBC) % of Total IBC % of Rating Category Count Overweight/Buy % % 39% Equal-weight/Hold % % 35% Underweight/Sell % 99 15% 26% Total 1, Data include common stock and ADRs currently assigned ratings. For disclosure purposes (in accordance with NASD and NYSE requirements), we note that Overweight, our most positive stock rating, most closely corresponds to a buy recommendation; Equal-weight and Underweight most closely correspond to neutral and sell recommendations, respectively. However, Overweight, Equal-weight, and Underweight are not the equivalent of buy, neutral, and sell but represent recommended relative weightings (see definitions below). An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Investment Banking Clients are companies from whom Morgan Stanley or an affiliate received investment banking compensation in the last 12 months. ANALYST STOCK RATINGS Overweight (O). The stock s total return is expected to exceed the average total return of the analyst s industry (or industry team s) coverage universe, on a risk-adjusted basis, over the next months. Equal-weight (E). The stock s total return is expected to be in line with the average total return of the analyst s industry (or industry team s) coverage universe, on a risk-adjusted basis, over the next months. Underweight (U). The stock s total return is expected to be below the average total return of the analyst s industry (or industry team s) coverage universe, on a risk-adjusted basis, over the next months. More volatile (V). We estimate that this stock has more than a 25% chance of a price move (up or down) of more than 25% in a month, based on a quantitative assessment of historical data, or in the analyst s view, it is likely to become materially more volatile over the next 1-12 months compared with the past three years. Stocks with less than one year of trading history are automatically rated as more volatile (unless otherwise noted). We note that securities that we do not currently consider "more volatile" can still perform in that manner. Unless otherwise specified, the time frame for price targets included in this report is 12 to 18 months. Ratings prior to March 18, 2002: SB=Strong Buy; OP=Outperform; N=Neutral; UP=Underperform. For definitions, please go to ANALYST INDUSTRY VIEWS Attractive (A). The analyst expects the performance of his or her industry coverage universe over the next months to be attractive vs. the relevant broad market benchmark named on the cover of this report. In-Line (I). The analyst expects the performance of his or her industry coverage universe over the next months to be in line with the relevant broad market benchmark named on the cover of this report. Cautious (C). The analyst views the performance of his or her industry coverage universe over the next months with caution vs. the relevant broad market benchmark named on the cover of this report. Stock price charts and rating histories for companies discussed in this report are also 11