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Saturday, July 26, 2025

New approach needed to T&T's wealth fund

by

20110812

Trinidad and To­ba­go's sov­er­eign wealth fund, more for­mal­ly known as the Her­itage and Sta­bil­i­sa­tion Fund (HSF), shot in­to the news this week fol­low­ing the dis­clo­sure by the Gov­er­nor of the Cen­tral Bank, Ewart Williams, that the HSF would be im­pact­ed by the volatil­i­ty in the Unit­ed States eq­ui­ty mar­kets. The most re­cent quar­ter­ly re­port of the HSF re­veals that the to­tal mar­ket val­ue of its port­fo­lios as at March 31 was US$3.759 bil­lion. Of that amount, the fixed in­come man­dates ac­count­ed for 63.7 per cent of the to­tal in­vest­ments, while the eq­ui­ty man­dates made up the bal­ance of the 36.3 per cent. In ef­fect, ac­cord­ing to the quar­ter­ly re­port, T&T has US$1.3 bil­lion in­vest­ed in in­ter­na­tion­al eq­ui­ties with the mar­ket val­ue of the US Core Do­mes­tic Eq­ui­ty port­fo­lio amount­ing to US$697.1 mil­lion eand the Non-US In­ter­na­tion­al Eq­ui­ty port­fo­lio to­talling US$668.5 mil­lion.

The ques­tion that the board of T&T's sov­er­eign wealth fund should be ad­dress­ing is whether in­vest­ing 36.3 per cent of the Fund in in­ter­na­tion­al eq­ui­ties and an­oth­er 25 per cent of the Fund in short-term fixed in­come in­stru­ments is the op­ti­mal use of the HSF-part of which is meant to serve as the her­itage of fu­ture gen­er­a­tions. An in­di­ca­tion of a dif­fer­ent ap­proach to de­ploy­ing in­vest­ments from a sov­er­eign wealth fund came two days af­ter Mr Williams an­swered ques­tions on the HSF at a news con­fer­ence held to delve in­to the Ju­ly 2011 Eco­nom­ic Bul­letin.

On Wednes­day, Chi­na's sov­er­eign wealth fund, Chi­na In­vest­ment Cor­po­ra­tion, signed an MOU with French en­er­gy gi­ant GDF Suez, in which the Chi­nese com­pa­ny agreed to pay &eu­ro;2.3 bil­lion for a 30 per cent stake in GDF Suez's ex­plo­ration and pro­duc­tion unit and &eu­ro;600 mil­lion for the French group's 10 per cent stake in At­lantic LNG Train I, as well as pro­duc­tion pay­ments as­so­ci­at­ed with Trains II, III and IV. It seems that while a sig­nif­i­cant per­cent­age of the as­sets of Chi­na's sov­er­eign wealth fund are tied up in short and long-term US Trea­sury Bills, the coun­try has tak­en a de­ci­sion to in­vest some por­tion of its long-term wealth in mak­ing large strate­gic in­vest­ments in com­pa­nies that pro­duce goods that ei­ther are in short sup­ply in Chi­na or that the Asian gi­ant be­lieves will be a good fu­ture strate­gic fit.

An­oth­er ex­am­ple is the In­ter­na­tion­al Pe­tro­le­um In­vest­ment Com­pa­ny (IPIC), an in­vest­ment com­pa­ny set up by the Emi­rate of Abu Dhabi in 1984. Among oth­er in­vest­ments, IPIC whol­ly owns No­va Chem­i­cals, a Cana­di­an plas­tics and chem­i­cals com­pa­ny, and is a ma­jor­i­ty share­hold­er in the Ger­man con­struc­tion firm MAN Fer­rostaal, which is re­spon­si­ble for a sig­nif­i­cant per­cent­age of the plants at the Point Lisas In­dus­tri­al Es­tate. While the scale of the re­sources con­trolled by the sov­er­eign wealth funds of Chi­na and Abu Dhabi vast­ly out­shines T&T's more mod­est ef­fort, there ap­pears to be some strate­gic in­tent part­ly dri­ving new think­ing in the de­ploy­ment of the wealth of some na­tions. Yes, there con­tin­ues to be an at­tempt to earn rates of re­turn that are high­er than those gen­er­at­ed by a com­bi­na­tion of US Trea­suries and in­ter­na­tion­al eq­ui­ties. But there is al­so a def­i­nite at­tempt to con­trol com­pa­nies that may ben­e­fit the pur­chas­ing coun­try's long-term in­ter­ests. And the fo­cus seems to be on con­trol-even if that's not the way it starts out.

This is the kind of think­ing that ap­pears to be dri­ving the man­agers of the sov­er­eign wealth funds in Sin­ga­pore, in Nor­way and in Abu Dhabi. Gov­ern­ment's con­trol, but not own­er­ship, of the CL Fi­nan­cial as­sets may be an av­enue for this new ap­proach to in­vest­ing the T&T sov­er­eign wealth fund. Clear­ly, if T&T is to adopt some of this new think­ing, the Gov­ern­ment will have to en­gage in a great deal of con­sul­ta­tion with the na­tion be­cause the suc­cess of the HSF is some­thing in which every man, woman and child in T&T-and those who serve as trustees for the 17,000 plus new cit­i­zens born every year-should have a deep and abid­ing in­ter­est.


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