LIA Portfolio Snapshot

Author: Rachel Ziemba  ·  May 26th, 2011  ·  261086http%3A%2F%2Fwww.economonitor.com%2Fanalysts%2F2011%2F05%2F26%2Flia-portfolio-snapshot%2FLIA+Portfolio+Snapshot2011-05-26+20%3A26%3A02Rachel+Ziembahttp%3A%2F%2Fwww.economonitor.com%2Fanalysts%2F%3Fp%3D261086 › Share This Print

A leaked statement of the Libyan investment authority (LIA)’s portfolio from mid last year gives a rare glimpse into its US$53 billion asset portfolio, much of which has been frozen in early 2011 due to sanctions. While only one data point, it provides more details on how Libya was diversifying its assets.

Although described as the funds of the Libyan public, it has become clear that the Qadhafi family also saw the funds as being some of their personal assets to use as needed. In fact this freeze was a key turning point for global asset managers and buyers courting sovereign asset management as they faced the uncertainty of having shares and assets locked up. While sovereign funds vary and most have a clear mandate, the experience may well encourage other sovereign funds to be clearer about the lines between the government, the fund and the people, which many are doing through the Santiago principles.

Largely the report, if it is correct, confirms several assumptions of sovereign wealth watchers.

• LIA still had a lot of its assets in cash, partly due to a slow implementation of investment following the market gyrations over the 2008-10. There has long been a murky line between the assets of the LIA and the foreign assets reported by the Central bank of Libya (almost US$95 billion in mid 2010, the time of the LIA report, or just over US$100 billion in January 2011). We have long assumed that that CBL managed some of the cash deposits of the LIA, a fact confirmed in the report, by the fact that some of the deposits were managed by the CBL. The exact breakdown in assets between the two has never been entirely clear, which has complicated efforts to assess Libya’s wealth.
• Bond/cash allocations predominately in USD, reflecting the currency in which Libya received oil revenues, the dollar-based nature of the Libyan currency peg.
• Equity focus on Europe compared to the U.S. The LIA’s visible equity investments were largely in the EU. Italian investments were particularly extensive, stemming from close bilateral ties in trade and investment and personal ties between the leaders. However, the LIA was invested across Western Europe. Moreover, a plurality of the cash allocation seems to have been in euro, suggesting that it might have increased cash allocation in the quarter.
• Highly invested in financials – with large stakes in Uncredit and other banks, the LIA like many sovereign funds seems overweight financials.
• Highly invested in companies that were involved in economic development in Libya. It reported strategic stakes in companies like SNC-Lavalin, Siemens and others which had infrastructure contracts in Libya and of course the Italian company ENI.
• Involved in alternative investments, including investment in Hedge funds, structured products and other alternative investment. Libyan losses on some of these products have attracted much of the media attention, but are part of a broader trend.
• Its subsidiaries (LAFICO and others) accounted for much of the allocated funds, suggesting that the LIA was just starting to really deploy its assets, perhaps waiting for some of the risk-on/risk off behavior to subside.

At the time, the fund was overweight cash relative to its strategic benchmark, which called for a higher bond and equity allocation than had yet been invested.

LIA Asset Allocation Snapshot, Q2 2010

Source: LIA (via Global Witness)