THE FIFTH Sovereign Wealth Funds Conference Proceedings 2018 Sponsors
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THE FIFTH Sovereign Wealth Funds Conference Proceedings 2018 Sponsors HRH Prince Abdulaziz bin Talal Al-Saud & HH Princess Sora Al-Saud EMBASSY OF THE UNITED ARAB EMIRATES WASHINGTON, DC 2 Table of Contents PROCEEDINGS CONTENT Sponsors………………………………………………………………………......……………………………......……………………………......……………………….02 Organizing Committee………………………………………………………….....……………………………......……………………………......………….......04 Acronyms……………………………………………………………………….....……………………………......……………………………......………………………05 Executive Summary…………………………………………………………….....……………………………......……………………………......………………….06 Presentation Summaries…………………………………………………………..……………………………......……………………………......……………….07 APPENDICES Meeting Agenda…………………………………………………………………..……………………………......……………………………......…………………….09 Speaker Biographies……………………………………………………………....……………………………......……………………………......…………………11 Panelist Biographies……………………………………………………………....……………………………......……………………………......………………….13 Opening Remarks: Dr. Ghiyath Nakshbendi……………………………………...……………………………...……………………………...................18 Slides: Dr. Ghiyath Nakshbendi………………………………………………………………………………………………………………………………………..21 Keynote Speaker Slides: Mr. Timothy J. Richards……………….……………..…………….……………..…………….……………..…………….…….28 Panel A Opening Remarks: Dr. Michael Papaioannou………………………….…………….……………..…………….……………..…………….….33 Panel A Slides: Mr. Thordur Jonasson…………………………….…………….…………….……………..…………….……………..…………….…………34 Panel A Slides: Mr. Diego López……………………………………………………………….……………..…………….……………..…………….……………45 Panel A Slides: Mr. Abdiel Santiago…………………………………………….…………….……………..…………….……………..…………….……………41 Panel A Slides: Dr. Michael Papaioannou & Mr. Bayasgalan Rentsendorj………………….……………..…………….……………..………..53 Panel A Closing Remarks: Dr. Michael Papaioannou…………………………..…………….……………..…………….……………..…………….…..66 Panel B Remarks: Dr. Timothy Timura………………………………………….…………….……………..…………….……………..…………….…………67 Panel B Slides: Dr. Timothy Timura……………………………………………..…………….……………..…………….……………..…………….…………..68 Panel B Slides: Dr. Amin Mohseni-Cheraghlou……………………………….....…………….……………..…………….……………..…………….……70 Panel B Slides: Mr. Babak Hafezi………………………………………………..…………….……………..…………….……………..…………….……………80 Keynote Remarks: Mr. Fred P. Hochberg..............……………….……………..…………….……………..…………….……………..…………….…….91 Pictures from the Conference………………………………………………..…..…………….……………..…………….……………..…………….…………...93 3 Organizing Committee Ghiyath Nakshbendi, Co-Chair Jeffrey Harris, Co-Chair Robert Brockmeijer, Conference Coordinator STRATEGIC COMMUNICATION Deidre Blackmore Paige Kline Jamie McCrary Carrie Moskal Katya Popova Marissa Rodriguez Ali Yares VOLUNTEERS Mohammad Alfadhli Tyler Biddle-Axelrod Aleena Butt Justin Cohen Samantha Diaz Saliho Toure 4 Acronyms APFC Alaska Permanent Fund Corporation AU American University AuM Assets under Management BRI The Belt and Road Initiative ECB European Central Bank EM(s) Emerging Market(s) EPS Earnings Per Share EU European Union EXIM The Export-Import Bank of the United States FAP/Fund The Fondo de Ahorro de Panamá GCC Gulf Cooperation Council GDP Gross Domestic Product GE General Electric GFC Global Financial Crisis GIC Government of Singapore Investment Corporation GPFG Government Pension Fund Global IFSWF International Forum of Sovereign Wealth Funds IPO Initial Public Offering IMF International Monetary Fund KSB Kogod School of Business ME The Middle East MENA The Middle East and North Africa MENAT The Middle East, North Africa, and Turkey MOU Memorandum of Understanding NAFTA North American Free Trade Agreement NCUSAR The National Council on U.S.-Arab Relations PE Private Equity PPP Private-Public Partnerships ROI Return on Investment SAA Strategic Asset Allocation SAMA Saudi Arabian Monetary Authority SIF Strategic Investment Funds SP Santiago Principles SSA Sub-Saharan Africa SWF(s) Sovereign Wealth Fund(s) SWFI Sovereign Wealth Fund Institute UAE United Arab Emirates US United States USMCA United Sates-Mexico-Canada Agreement 5 Executive Summary American University’s Kogod School of Business (KSB) SWFs, as defined by the International Monetary Fund, are convened its fifth annual Sovereign Wealth Fund (SWF) Conference on October 24, 2018 at American University “a special purpose investment fund or arrangement, (AU) in Washington, D.C. The conference examined owned by the general government. Created by the recent changes in the sovereign wealth funds since general government for macroeconomic purposes, last year’s meeting. Since the Fourth Sovereign Wealth SWFs hold, manage, or administer financial assets Funds (“SWFs”) Conference at American University in to achieve financial objectives, and employ a set October 2017, the world has experienced changes in of investment strategies, which include investing global economic conditions including lower than usual oil in foreign financial assets. SWFs are commonly prices, a greater push by oil-producing countries to focus established out of balance of payments surpluses, on diversification, and the addition of different types of official foreign currency operations, the proceeds country-specific levies (value added among others) on of privatizations, fiscal surpluses, and/or receipts their citizens. Fintech is expanding in the financial space resulting from commodity exports.” and continues to have an impact on how SWFs conduct their activities. There is a new trend toward investing The activities of SWFs are becoming more transparent in the emerging markets--is this a long-term trend? The due to changes in technology and pressures from the fifth international conference (“Conference”) addressed media. these issues and assessed how these global changes are impacting SWFs, all in the context of “Sovereign Wealth Following the introduction of the 2008 Santiago Funds in the 21st Century.” Principles, individual SWFs have become increasingly transparent due to a new spirit of sharing information, Four keynote speakers and 11 panelists presented papers a greater commitment to factual disclosure in the and remarks. investment sphere, and greater incentives to attain higher scores based on these Principles. Global changes on all The conference was generously supported by HRH Prince fronts impact the operation of the SWFs. More recently, Abdulaziz bin Talal, HH Princes Sora Al Saud, The Embassy a major trend has been the increasing focus of SWFs to of the United Arab Emirates in Washington, D.C., The manage their own funds and to utilize external managers National Council on U.S.-Arab Relations (NCUSAR), the only on a targeted basis. Kogod School of Business, and American University. Below is a brief synopsis of the conference. The Fifth Sovereign Wealth Funds Conference was entrusted to assess “Sovereign Wealth Funds in the The first Keynote speaker was a senior executive of a 21st Century.” More generally, the conference aims global company with close knowledge and experience to generate interest in the area of SWFs in terms of in the GCC’s sovereign wealth funds, the second was a new courses and research in this area, which remains seasoned international executive with wide experience neglected because of its particular nature and the in international markets and one of the specialist of “sovereign” focus of these funds. While somewhat Santiago Principles and is the executive managing neglected in the past, technological advancement and the director of the Institute of International Finance, the growing global footprint of SWFs have increased interest third speaker was an expert of national and international in how SWFs function and how they interact with global business and a former president of the Export-Import financial conditions. Bank of the United States and the final speaker has an intimate knowledge of the GCC and was the founding president and chief executive officer of the National Council on U.S.-Arab Relations. Conference speakers and panelists included representatives from The International Monetary Fund, The World Bank, The National Council on U.S.-Arab Relations, The Institute of International Finance, the CEO of the Panama Sovereign Wealth Fund, and well-known law firms representing countries from major SWFs. The conference included speakers from other boutique organizations active in finance, commerce, education, and think tanks. 6 Presentation Summaries Most of the speakers and panelists provided either addition to Sovereign Development Funds and Sovereign written papers, statements, and/or PowerPoint Investment Funds. Generally, ownership of the fund presentation slides, all of which are being included as dictates its strategic asset allocations (SAAs), and not all appendices to these proceedings. SWFs have the same long-term investment horizon as the the more typical SWF stabilization funds. While it is A number of current economic developments serve as expected that SAAs will follow changes in the economies background to the 2018 conference. Firstly, it comes at of the world (developed and emerging), geopolitical a time when the world is experiencing several economic uncertainty has increased the share of cash in most SWF challenges, including the downgrade of global expansion portfolios. Accompanying this important shift in SAAs from 3.9 percent to 3.7 percent and an alert that trade has been a gradual shift toward investing in more risky tensions could reduce international trade by 0.8 percent assets. This could be attributed partially to the global in 2020. Secondly, international tensions such as the financial crisis--while SWFs, by and large, used to avoid trade war between