Sovereign wealth fund lucrative for thailand

According to a new report by Global Insight, the state-run investment funds' holdings will surpass the economic output of the United States by 2015.

The SWFs grew by 24 per cent annually in each of the past three years to oversee US$3.5 trillion (Bt111 trillion) as countries such as China and Russia diverted currency reserves into riskier assets, according to the report which was published earlier this week. US gross domestic product was $13.2 trillion last year.

"Sovereign wealth funds are the new financial powerbrokers," said Jan Randolph, head of sovereign risk at Global Insight, a US financial-analysis firm.

The funds channelled $80 billion into banks in the US alone last year, said the report. Nigeria's fund has grown the fastest, followed by those of Oman and Kazakhstan, while China's $1.2-trillion fund remains the biggest, ahead of funds in Russia and Kuwait, Global Insight calculated.

Not only do they have a high rate of growth each year, there are more new SWFs set up each year.

According to the website of the Financial Times, Saudi Arabia's Public Investment Fund is in the "final stages" of launching that country's first sovereign wealth fund, but its early financial commitment will disappoint those hoping for another mega-fund.

Mansour Al-Maiman, secretary-general of the internally focused Public Investment Fund, said an investment company wholly owned by the fund would be set up with initial capital of $5.3 billion.

The confirmation that Saudi Arabia plans to launch an SWF means the conservative state will finally join the ranks of other oil-rich Gulf states actively seeking to invest across global asset classes to boost the returns of state coffers.

Saudi Arabia has by far the largest economy in the Gulf and has seen its declared official foreign assets soar to more than $330 billion managed by the central bank, with some estimates putting the total assets under management far higher.

Thailand will soon join the party. With gross foreign reserves jumping to about $100 billion recently, a Bank of Thailand official said the central bank was now considering setting up an SWF with initial capital of $5 billion, close to Saudi Arabia's.

Though this is still not certain, considering the high growth rate of SWFs one might expect the Thai central bank to reap big profits from such a fund.