Managing Libya's $67bn Sovereign Wealth Fund

By Padraig O'Hannelly.

Libya is complicated. With two rival governments, controlling rival armies that themselves contain competing factions, it's hardly surprising that control of one of Libya's biggest assets, its $67-billion sovereign wealth fund, is also contested.

To some extent, the battle for control of the Libyan Investment Authority (LIA) mirrors the divisions within Libya itself, while the seemingly random bag of assets that it owns could be a metaphor for the chaos afflicting so many aspects of Libyan society.

Attempting to bring some structure and direction to the fund is the Chairman of the Board of Directors at the LIA's Tripoli headquarters, AbdulMagid Breish (pictured); also claiming to chair the company is Malta-based Hassan Bouhadi -- more on this power struggle later.

When I sat down with Mr Breish in London, the veteran banker outlined his plans to restructure the business and take on the might of Goldman Sachs and Société Générale (SocGen) in court.

As regards the litigations, he said, “we have set aside ... a huge amount of money - nine figures. We really want to see both litigations go until the very end, and we are willing to fund them no matter what it takes, and no matter what it costs."

Restructuring

In addition to fairly liquid investments in cash, bonds and equities, about half of the LIA's value is accounted for by 550 unquoted companies, many of which are being managed by the company. Mr Breish's plan is to put all non-core assets into a 'legacy' company, with a view to selling them off as soon as practicable, while holding onto the investments that are more suited to the needs of the fund.

Ultimately, he wants to split the remaining business into three distinct parts:

  • The Future Generation Fund: With operations based in London, this would be a typical 'sovereign wealth' fund;
  • The Local Development Fund: Already in existence, its aim would be to kick-start the local economy, providing seed capital for major infrastructure projects that would eventually be sold to the private sector; and,
  • The Budget Stabilization Fund: Requiring a new act of parliament, this would be funded from a levy on oil revenues, and would invest in short-term instruments with the intention of having funds available to cover budget deficits.

Each of these entities would have different risk profiles and return benchmarks, which are still in the process of being determined.

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