Re: "Wealth Fund - Chalongphob opposes idea, cited SK loss", News, September 6.
Chalongphob Sussangkarn warned against sovereign wealth funds, citing the losses of South Korea's fund in investing in sub-prime mortgage financial instruments. However, few sovereign funds or even commercial banks in Asia were burnt by this financial debacle in 2008.
A respectable investor would never invest in instruments that were not understandable. The instruments were also marketed at that time in Thailand without much success by those US financial whiz kids. They made you feel stupid for not understanding this instrument. With that trick, a few bought them, which turned out to be the biggest fraud in history. Currently 17 international financial companies (mainly US) are accused by the US government of fraudulently marketing them.
As Warren Buffett said, "If history is a basis of investment, then a librarian should be rich." One needs to look prospectively. Unavoidably, more countries are sliding into this idea of having a sovereign wealth fund because of incurably weak dollars and the near-collapse of the euro, which would make any foreign reserves lose their value like quicksand.
The respectable funds are normally in infrastructure, such as seaports; property and even department stores like Harrods. Besides oil-rich countries, Singapore, China, Australia, Malaysia, Chile, New Zealand, Indonesia and even Vietnam have separate sovereign wealth funds. To have one's foreign reserve almost exclusively in weak currencies without finding some ways of correcting this imbalance is imprudent.
MR Chatu Mongol Sonakul was spot on that the fund could be started with a small sum of say $10 billion [Bt300 billion] as a learning curve. However, I do not believe technocrats without the private sector's help could manage the risk well. One needs finance men well conversed daily with the financial world's movement to support them. Men like Dr Suphavud Saichue or Dr Kongkiat Opaswongkarn are examples of an ideal management team.