Questions Loom For Libya’s Sovereign Wealth Investments

Πηγή: TWSJ
By Jonathan Shieber

Dec 12 2011

As Libya’s liberators come to terms with how to rebuild the country, three paths are emerging for the riches held in its sovereign wealth fund, according to a new report from international political consulting firm GeoEconomica GmbH.

The fund is the first sovereign wealth investment vehicle to be targeted by international sanctions and as governments begin to thaw frozen Libyan assets, the question becomes what’s next for the nearly $56 billion that was invested under the Gadhafi regime.

In the report GeoEconomica analysts Sven Behrendt and Deen Sharp predicts that the fund will either: evolve into a strategic investment vehicle, carry on with its traditional mandate as a savings fund for future generations, or (perhaps most likely) be liquidated as competing interest groups battle over Libya’s political and economic future.

The authors note that in the short term it’s likely that a significant amount of the resources in the Libyan Investment Authority will be drained, but that given Libya’s oil wealth the fund could again become a significant investor.

“The fund may be turned into a strategic investor that establishes important partnerships and alliances with international players,” the report states.

In another scenario that the analysts consider, Libya maintains its focus on investing for future generations, this time beyond the scope of Gadhafi’s descendents and the scions of the dictator’s inner circle.

However, the most likely fate of Libya’s sovereign wealth assets is perhaps the most unfortunate. Given the different agendas of those involved in Libya’s revolution, the GeoEconomica analysts conclude that a slow erosion of the fund’s value is perhaps the most probable outcome.

“The assets of the LIA are deemed susceptible to becoming a central point of contention between competing factions and a possible vector for the resurgence of conflict,” the analysts write.

Under the stewardship of Gadhafi’s appointees the Libyan Investment Authority was fairly private equity friendly, according to a management information report of the Libyan Investment Authority published in July by the corruption and human rights non-profit organization Global Witness.

As of September 2010, the fund had commitments to private equity funds that include Carlyle Group’s fifth core buyout fund and its fund focused on the Middle East and North Africa, as well as Goldman Sachs’ mezzanine fund and Petershill Fund. In all, Libya invested some $4.4 billion in its private equity holdings, according to Libyan Investment Authority documents released by Global Witness.

Representatives from Carlyle Group and Goldman Sachs were not immediately available for comment at press time.