Sovereign funds join hands for strategic investments

As per the latest trend noticed among a number of sovereign wealth funds, there is a definite move towards making joint strategic investments with the aim of decreasing risks and maximizing returns, thereby looking to give a notable push to the financial markets.

The latest state-owned funds to have signed agreements to form investment partnerships with one another are from China, Singapore, Malaysia, Korea, Abu Dhabi and Kuwait.

With the partnership, the state-owned funds would be able to optimize local knowledge, leverage capital, spread investment risks and maximize returns.

Furthermore, it can also help them in producing a bigger, more diverse and transparent entity, whose long-term investments -- often holding assets for years -- might help stabilize global markets.

These partnerships might also crush the concerns among regulators and politicians who suspect SWFs investments are politically driven by emphasizing on their commercial motives. 

According to Alexander Mirtchev, independent director of Kazakhstan's SWF Samruk-Kazyna, “They realize that their level of expertise is not universal and find that obtaining additional expertise via cooperation is a viable option for them. They are sharing risk and enabling access to welcome co-financing.” 

He continued, “In the crisis and post-crisis environment, such cooperation allows them to achieve a new level of legitimacy in markets where they have not operated before. SWFs have the potential to stabilize companies they invest in since these funds do not live by quarterly returns.”

Even Samruk-Kazyna's investment arm, Kazyna Capital Management, is mulling to create a fund with Tajikistan and Kyrgyzstan to co-invest in the region.

It should be noted that a whopping $3 trillion industry, which invests windfall revenues from oil or other exports for future generations, is made up by Sovereign wealth funds (SWFs).