Finance: The Intrigue of Sovereign Wealth Funds

Some eyebrows were raised during the last week of the 2012 presidential campaign when the second-oldest son of Republican presidential nominee Mitt Romney journeyed to Moscow.

Matt Romney was there to sound out potential Russian investors for his firm, Excel Trust, a U.S. shopping center developer. 

Mr. Romney is a senior vice president for the real estate investment trust with $820 million in assets. It distributes 90 percent or more in dividends. That allows investors to avoid double taxation.  

His Russian trip was surprising for two reasons:

Firstly, it was just before the epic event in his father’s career, and perhaps our debt-ridden nation.

Secondly, his father had criticized the Obama Administration for a soft-yogurt stance with President Vladimir V. Putin’s government.

You might recall the missile-defense controversy when Mr. Obama was caught on videotape telling Russia’s Dmitri A. Medvedev “…after my election, I have more flexibility.”

During a presidential debate, Mr. Romney asserted: “I’m not going to wear rose-colored glasses when it comes to Russia or Mr. Putin. And I’m certainly not going to say to him, ‘I’ll give you more flexibility after the election.’ ”

Despite the politics, there was a potential prize for the younger Romney’s company – a massive amount of money – part of Russia’s sovereign wealth fund (SWF). 

Origin of SWF concept 

Not to over simplify, an SWF is a government-owned investment fund that a country invests globally in a variety of ways. SWFs funds are often managed in nations’ banking systems or are invested by government agencies for a financial return. 

Governments generally generate SWFs out of budgetary surpluses. Budget surpluses? Hmm. That’s why a member of the Romney clan would go abroad for funds, and why the company that runs Heathrow Airport sold a 10 percent stake to the China Investment Corporation.

Now, even tiny Angola has entrepreneurs salivating — it created a $5 billion sovereign wealth fund in October 2012. 

In 1953, oil revenue prompted Kuwait to form its investment vehicle even before the country left the United Kingdom. The Kuwait Investment Authority is now believed to be worth at least $300 billion. 

So, the concept has been around for decades, but the term was coined in 2005 by Andrew Rozanov when he wrote “Who holds the wealth of nations?” in the Central Banking Journal. 

Before you ask, yes, several SWFs were invested on Wall Street in Citigroup, Merrill Lynch and Morgan Stanley amid the financial crash. 

Espionage potential 

But SWFs can be a mixed bag. For example, such foreign investments can cause national security concerns.  

Incredibly, a Chinese company, Sany Group Ltd. is suing President Obama in U.S. District Court because he issued an order preventing the firm from consummating a deal for four Oregon wind farms. Sany’s subsidiary, Ralls Corp., bought the wind farms this year.  

The younger Romney hasn’t been the only one on a hunting trip for funds. U.K. Prime Minister David Cameron toured the Middle East seeking sovereign wealth to fund job creation. Seeking funds for Britain’s wind farms and other sectors, he met with the managers of the region’s largest sovereign wealth funds.”Our job is to support neighboring countries to develop industries that are complementary to China’s growth,” published reports quoted Mr. Lou Jiwei, chairman of the China Investment Corp. “We hope a stronger Chinese economy can benefit our neighbors.”

With all the sovereign wealth worldwide, it’s ironic that the most-prosperous nation in the world is so debt-ridden, and 23 million Americans can’t find family wage jobs. Wouldn’t be nice if the U.S. would rack up budget surpluses instead of $16+ trillion in debt and greatly reduced the unemployment rate?

Now that’s an intriguing thought.

P.S. Here’s a hint: Perhaps you’ve caught on — if you have investment skills, these developments would appear to be career-enhancing opportunities.

From the Coach’s Corner, here are articles on financial matters:

“The Obama administration’s large and sustained increases in debt raise the specter of another financial crisis and large future tax increases, further chilling business investment and job creation.”

-Glenn Hubbard


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Why CFOs Call the Shots in IT Decisions

The top IT decision-maker for many companies is not the chief information officer. The chief financial officer is increasingly calling the shots for IT.

The CFO has become the top technology decision maker in around half of businesses, according to Gartner research released in June, 2011, which is entitled: “Financial Executives International (FEI) Technology Study.”

In fact, more IT departments are overseen by the CFO, not the chief executive or other senior managers. True, CIOs should learn how to get more respect in the C-suite. But for the CFO to call all the shots in IT decisions is ill-advised, and I’ll explain later.

ID-100123176 imagerymajesticThe study’s conclusions:

— 42 percent report to the CFO

— 45 percent IT investment strategies made by the CFO

— In 38 percent, the IT department is managed by the CFO

— In 7 percent, the CFO is the lone decision-maker

“Understand that the CFO views the impact on business process and business enablement as the top technology issues,” said Gartner analyst John Van Decker.

“Therefore, applications and analytics are the top investment priorities, and the enabling technologies that support these initiatives need to be viewed as equally important,” he added.

The study also indicated that analytics and applications are the No. 1 investment priorities by the CFO.

While this trend probably makes financial executives happy, it doesn’t make for best practices.

It raises at least three questions:

— Do such CFOs have the necessary tech knowledge to understand the value of each decision? Sufficient steps have to be taken to ensure due diligence in IT security and other decisions.

— When will CEOs reconsider such strategies because of the negative impacts on the teamwork and morale of IT departments? An IT thought leader will resent such intrusions on the chain of command in organization structure.

— What will CIOs do about it? CIOs must take the proverbial bull by the horns to exert more leadership.

My bottom-line: Agreed, the CIO should adhere to all financial checks and balances. But there should be balance.

As with human resources management and marketing whom the chief people often aren’t sufficiently respected, in essence, the top IT decision-maker should be the chief information officer with input from the CFO and other managers.

From the Coach’s Corner, here’s related reading:

4 Keys So Marketing and IT Can Create Business Revenue — Businesses will generate more revenue if their information technology and marketing professionals strategize more effectively. For instance, success in e-commerce is increasingly challenging for companies that want to dominate in brand preference, customer loyalty and word-of-mouth advertising. A study shows Internet shoppers are more demanding in the three Cs — channels, choices and convenience.

4 Recommendations to Avoid Spending Too Much on IT — To take advantage of big cost savings in information technology, a study says businesses need to change their buying habits. Here’s how.   Despite an unprecedented trend to control information-technology costs, the majority of companies fail to achieve maximum savings, according to a multi-nation Forrester Consulting study.

Tech Trends: CFO’s the Boss, IT Departments Are Disappearing — Two developments are clearly underway in information technology. Increasingly, the chief financial officer is in charge and IT departments are shrinking in size. Here’s why.

Tech Planning: What If There’s Another Downturn? — Technology-research firm Gartner recommends in a study that chief information officers should get ready for another downturn. That requires planning.

Executives Target 5 Technology Threats to Company Value — Corporate executives see new strategic risks as a result of technological changes — from big data and cloud computing to social media  — according to a 2013 global Deloitte survey. Deloitte queried more than 300 executives, risk managers and board members — 81 percent said their strategic-management focus has evolved with technology.

Men are respectable only as they respect.”

-Ralph Waldo Emerson


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Photo courtesy of imagerymajestic at

Seattle business consultant Terry Corbell provides high-performance management services and strategies.