Libya fund's depleting portfolio may hamper post-war rebuild

* Libya fund's market value stood at $64.18 bln at Sept 30, 2010

* Fund's equity portfolio had lost 17 pct in Q2 2010 vs Q1 2010

* $1 bln Soc Gen structured product investment valued at $284.5 mln

By Dinesh Nair

DUBAI, Aug 22 (Reuters) - Libyan rebels on the verge of bringing Muammar Gaddafi's 41-year old regime to an end will likely inherit a depleted investment portfolio in the country's secretive sovereign wealth fund, as the market downturn this year worsens an already weak performance in 2010.

The fund, set up in 2006 to manage the country's oil revenues and with stakes in European bluechips, is seen key to any post-conflict reconstruction of the African country and any new government will rely on the fund for future economic development.

The market value of the Libyan Investment Authority's (LIA) investment portfolio rebounded in the third quarter of 2010, after a 4.5 percent slump in the prior quarter, to $64.19 billion as of Sept. 30, 2010, the fund's management information report showed. But that is still below a widely quoted figure close to $70 billion.

A sharp drop in asset values after the debt crisis in Europe and a downgrade of the United States' credit rating is likely to have further thinned the portfolio even though latest figures are not available, analysts say.

"The drop in market value of the fund's portfolio is reflective of its mismanagement under Colonel Muammar Gaddafi's rule," said Karin Maree, an analyst at the Economist Intelligence Unit in London.