What about Libya's SWF?

What became of the billions of dollars (perhaps as much as $100 billion) in assets held by the Libyan Investment Authority? Jim Armitage of The Independent reports:

Some governments have been taking advantage of the ongoing instability in Libya to try to wrest control of assets bought by the fund. In Zambia, the President nationalised the LIA’s $257m stake in the local telephone company. In Niger, the parliament voted to nationalise its phone business, breaking promises to sell it to the LIA.

In Italy, the financial police seized LIA-owned assets on the grounds that the LIA is a Gaddafi-controlled entity. These include stakes in UniCredit Bank, the oil giant ENI, Fiat, and even Juventus Football Club. The seized assets total some $1.39bn.

While some may be more concerned with the potential of the Ghaddafi family to return to power, the more realistic concern is whether the current Libyan government is capable of managing the wealth.  There are other important lessons from Libya for asset managers (and SWFs): transparency and governance matter.  Armitage notes, 

As is now blindingly obvious, Western businesses should never have got involved with the LIA. Not only due to the distasteful nature of Gaddafi’s regime, but because the fund was so opaque. Details of its investments were sparse, financial accounts hard to access or impossible to interpret. The concept of “know your customer” must have been pretty much absent in all dealings with the fund.

An investigation last year by Libya’s transition government found “misappropriation, misuse and misconduct of funds” . It said $2.9bn was missing.  A subsequent Financial Times investigation found widespread mismanagement and waste, and even employees admitted to a shambles.



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