Who is Dubai International Capital’s spinmeister? Because it’s a tough job, in our view. The interview published in Wednesday’s FT with Sameer al-Ansari, DIC head, prompts us to consider how DIC and other sovereign wealth funds are dealing with the continuing waves of bad publicity.
Mind you, DIC faces more of an image challenge than most SWFs when it comes to the UK, being involved in the high-profile struggle to buy Liverpool Football Club and contending with observations that its involvement could see a Premier League club being “wholly owned and guaranteed for the first time by a sovereign state”.
The structure of DIC’s latest spin, however, is particularly noteworthy:
The cry for sympathy: The fund has been “forced” to focus on emerging markets, due to the western backlash against SWFs and also global market turmoil, al-Ansari told the FT.
The underlying complaint: In an understandable — but potentially slightly precarious argument for an SWF that might suddenly find itself owning a slice of English premier football or a western bank or two - he said that western pressure for greater SWF transparency was making investors from the region “more careful” about deals in the US and Europe.
Make them jealous: Anyway, he said, there were now “more interesting opportunities” in emerging markets, particularly in Asia, than in Europe or the US. And besides, he suggested, certain big investments in western companies were not really paying off that well.
We don’t want you anyway: On top of all that, tight conditions in western credit markets had made it difficult for DIC’s private equity arm to raise debt for company buy-outs, he said, adding that valuations of potential western targets would have to come down before investors such as DIC would be willing to put up more equity in deals.
So there.
Meanwhile, we note the slightly less sophisticated approach by Saudi Arabia with its own new SWF: simply insist your fund is not an SWF.
“What we are setting up is an investment company, not a sovereign fund,” the Saudi finance minister, Ibrahim al-Assaf, told delegates at a conference in Riyadh on Tuesday, reports Reuters.
The new $5.33bn, Saudi state-owned investment firm may be open to partners, and could initially focus investments in the technology sector, al-Assaf added, while urging countries to keep their doors open to foreign investment and avoiding restrictions on flows of capital.
The most simple - though we doubt it is the most effective - tactic, however, comes from the Chinese.
The Australian newspaper quotes (via Reuters) Jin Liqun, who is tipped for a senior role in China’s $200bn SWF and was the country’s vice-minister of finance between 1998 and 2003, saying China’s growing overseas investment is a natural consequence of its development and should not be viewed as a threat.
The deployment of China’s massive reserves abroad is positive for the global economy as a whole, he said, citing Africa as an early beneficiary. Just consider how China had not only bought assets in Africa - it had forgiven debt in the continent and provided infrastructure as well as medical aid.
More convincingly, he told Reuters on the sidelines of the Asian Development Bank’s AGM: “Developed countries want to come to China for business and they regard this as normal. But when China’s wealth fund starts to invest overseas with minority stakes, why is it such a big issue?”
“I think a change in the mindset on the part of the developed world is important.”
Simple as that.
Update:
Dubai: 7th May 2008 — Dubai International Capital LLC (’DIC’), the international investment arm of Dubai Holding, today announces that it has appointed Mark Lunn as Managing Director, Corporate Communications.
Mark, aged 42, has over 16 years experience in financial and corporate communications and is a specialist in the financial services sector. He joins DIC from Gavin Anderson & Co, an international financial PR consultancy, where he was a London based Managing Director with an international client portfolio and responsibility for the Middle East.
