Sunday, 2 August 2015

Ten Alternative Asset Classes for Investment Selection (Part Two)

My last blog spoke about alternative asset classes for investment selection in a broad way in terms of the options available and I listed some of major alternatives available for capital allocation.

The investment option of particular interest to me is the sovereign wealth funds (SWF) and its management and investment selection.

  1. What informs how it is managed?
  2. How the investment decision is made?
  3. What kind of returns is expected from a sovereign wealth fund investment?
  4. Who benefits the most from the capital assets deployed?
Political Considerations:
Sovereign fund wealth would appear to form part of an political agenda for the SWF controlling interest and by that I mean the government since most sovereign is owned by the governments in some form of pension fund or some other organized structure.

The politics of it is the Chinese/United States exchange. The Chinese moves into Africa peacefully to build out road network and target infrastructure development while at the same time finding work for four hundred million Chinese nationals into these areas of operations i.e. Ethiopia, Kenya, and Jamaica. The Chinese do this without the threat of war and they don't give a rat's ass about your local conditions, except to provide an appeasing response to a request to help further their cause. The US strategy is somewhat different.

The Americans enters these post Chinese entrance countries and present rhetoric of human rights breaches and corruption as being the root cause for low to no economic growth in these countries i.e. Ethiopia, Kenya and Jamaica. These arguments threaten to disrupt the existing relationship with the Chinese investments in these countries. The Chinese is not looking at population size and distribution channels coming from one place all at once and doesn't seems to be focusing on a mass market model in a concentrated manner, but the Chinese instead appears to like a disperse multiple market model concentrated by continent.

The Chinese is not about rhetoric and seek to make progress to advance their race. Their SWF sets the tone of their intentions and it also accounts for their economic growth too. Their economic success is not only as a result of internal economic growth. Their growth is also what comes from their SWF invested internationally.

(btw) My book of the day is: The China Challenge

What is the Jamaican strategy going forward?

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FII