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Post-meltdown India positive about sovereign wealth funds

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The global downturn has spurred interest in sovereign wealth funds investment but concerns over transparency could obstruct their investment strategies, according to the Sovereign Brands Survey 2010.

Conducted by Hill & Knowlton and Penn Schoen Berland, two research and communications strategy consultants, the study interviewed elites in seven markets on their views of 19 host countries and their sovereign wealth funds.

The survey revealed nearly two thirds (63 per cent) of Indian elites are more favourable towards sovereign wealth funds since the global downturn. This rises to 78 per cent in China and 80 per cent in Brazil.

Furthermore, an economic recovery is likely to accelerate interest in sovereign wealth funds especially among the Asian economic giants – India (69 per cent) and China (82 per cent).

More than half of the Indian elites surveyed consider such investments trustworthy (53 per cent).

It is no surprise that sovereign wealth funds have invested more than Rs 4,000 crore since 2003 in Indian equities, thanks to pre-2008 commodities boom and economic acceleration.

Vinod Moorthy, vice-president, Ipan Hill & Knowlton, says: “India is a developing economy. What it needs is stable capital unaffected by market movements. Sovereign wealth funds therefore stand a better chance than conventional (hedge or investment) funds, as they are not governed by investor redemptions and liquidity concerns. Perhaps this is the reason why 63 per cent of Indian elites are more favourable towards sovereign wealth funds since the recession, compared to the average of 51 per cent. The fact that sovereign wealth funds are popular in the business world is understandable. Such funds are more visible, are viewed as opportunities as well as threats, and demonstrate a consolidation of high finance with high politics.”

Nonetheless, the survey revealed, host countries most interested in sovereign wealth funds are also the most cautious – 97 per cent of elites in China and 60 per cent in India had reservations about sovereign wealth funds investing in their countries.

All elites were adverse to sovereign wealth funds investing in their defence sectors (45 per cent approval overall). This view was felt most strongly by those in the UK and Germany, where only 30 per cent and 21 per cent would approve respectively. Indian elites (73 per cent) were keener for investment into their finance sector than the other counties surveyed, along with Brazil (84 per cent), China (78 per cent) and Egypt (95 per cent).

Nearly nine out of ten (88 per cent) of elites in India would welcome investment into the technology sector, higher than the average (86 per cent), and only eclipsed by China (93 per cent) and Brazil (90 per cent). Indian Elites also favour sovereign wealth funds investment into healthcare (87 per cent) and construction (86 per cent).

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