An overview of the Libyan sovereign wealth fund's bad moves, including investments in some of Italy's top firms such as energy giant ENI and industrialist Finmeccanica
MILAN - The real mystery of Libya's oil treasure seems to be how much of it has been squandered by disastrous investments. The anti-corruption organization Global Witness has published on its website a detailed report, originally dated June 30 2010, about the troubled investments of Libya's sovereign wealth fund, the Libyan Investment Authority (LIA).
Currently, a UN resolution has frozen the assets of LIA, which owns a 2.6% share of the Italian bank Unicredit, a 2% share of the Italian oil and gas company ENI and a 1% share of the Italian industrial and hi-tech group Finmeccanica.
But from the report, it seems that LIA's investments should have been halted long before. While most sovereign fund managers tend to be highly professional investors, the LIA seemed to have another approach. One-third of its capital, $19 billion, was kept in deposits, while risky investments and huge mistakes were made with the rest.
During the quarter between April and June 2010, LIA's total asset dropped by 4.53%, from $55.8 billion to $53.3 billion. Not too bad, considering that the equity and currency derivatives portfolio's value plunged by 98%, from $1.24 billion to $20 million.
An investment of $1.8 billion set up by the French bank Société Generale left only $284 million. Stock options and assets were even more disastrous. An equity derivative investment in ENI lost 99% of its value. One with Unicredit lost 99.5%. A contract signed with Citgroup, which cost $100 million, left only $500,000.
Libya's good relations with Italy were clear from the sovereign fund wealth's portfolio. Almost 24% of LIA's investments were with Italian companies. Germany was the second partner, the US was the third and the UK the fourth leading partner.
Some of the biggest global fund managers worked with Gaddafi. LIA had structured product investments with HSBC, Commerzbank and Paribas, as well as private equity funds Carlyle, RBS and Goldman Sachs. Ironically, the Libyans were happy to help fuel Washington with financing. Two-thirds of LIA's $3.4 billion of bonds investment were invested in US government bonds.
photo - Hugo