Big Funds You’ve Never Heard Of–Part 3

Back in 2008, the IMF published a SWF “Work Agenda” that laid out a typology of sovereign funds that broke them into five sub-types: 1) stabilization funds, 2) savings funds, 3) reserve investment corporations, 4) contingent pension reserve funds, and 5) development funds.

Number 5 (the development fund) was defined as being an investment fund with a mandate to target ‘socio-economic projects to raise a country’s potential output growth’. In other words, development funds exist to professionalize state asset management through independence and commercial incentives in order to bolster domestic industries and drive economic and social development. The SWFs that I’d put in this category include Khazanah, Mubadala, Mumtalakat, Russian Direct Investment Fund, Samruk-Kazyna, Temasek and...a fund I’m wagering most of you have never even heard of...theState Capital Investment Corporation.

The SCIC is Vietnam’s (version of a) SWF. It’s been around for roughly seven years and represents – in as commercial and independent a manner as it can muster – the state’s interests in privatized companies. It also helps to restructure state-owned (or state-linked) enterprises.

Some view the fund as being a close cousin of China’s State-owned Assets Supervision and Administration Commission (SASAC). But the more appropriate (and oft-used) parallel is probably to a young Temasek. Like the Singaporean SWF, SCIC began its life focused on the domestic economy, but there are concrete plans for it to expand internationally. Indeed, the SCIC expects to be making overseas investments by 2016. And the fund already has a variety of joint ventures with foreign SWFs (to invest in Vietnam), including funds in Oman, Kuwait, Qatar and the UAE. These funds could advise the SCIC on its international diversification.

这一切都是say that the SCIC is an interesting fund that will pop up on your radar at a faster clip in the years to come. So I encourage you to read a paper by Duc-Tho (Tom) Nguyen, Tran-Phuc Nguyen & Jeremy D. K. Nguyen entitled ”Vietnam's SCIC: a gradualist approach to sovereign wealth funds”. It’s solid. Here is a useful blurb:

“...there was increasing recognition of the need to separate policy, regulatory and administrative authority from business management at SOEs. Such separation was seen as part of the reform process, and natural progression toward avoiding possible conflicts of interest and improving efficiency both in the SOE sector specifically and in the wider economy... This line of thinking led to the establishment of SCIC. The intention was to set up a professional, largely for-profit organization that in principle would replace line Ministries and local (e.g. provincial) authorities in managing the State’s interests in business enterprises.”

Have a nice weekend!