Libya wealth fund cash to finance reconstruction

Thu Nov 10, 2011 3:57pm GMT

By Mahmoud Habboush

DUBAI (Reuters) - Some of the over-large cash component of Libya's $65-billion sovereign wealth fund will be put to work financing post-Gaddafi reconstruction, leaving time for a full review of its less liquid investments.

"I expect an immediate shrinkage of the size of the fund," Rafik Nayed, acting chief executive of the Libyan Investment Authority (LIA), told Reuters in an interview on Wednesday.

"My feeling is that there will be large investments required in the near future and international reserves will be used to do that, especially as the oil production has not fully recovered."

He gave no details of how much of the fund would be used for infrastructure, education, health and rehabilitation projects. To access the cash -- about $29.5 billion of the fund -- Libya will need sanctions on its total foreign assets of $170 billion to be lifted.

"Cash and equities and fixed income products...make up about 77 percent of the total assets under management," said the 43-year-old Nayed, who is leading a team of Libyan financial experts tasked by the ruling National Transitional Council (NTC) with a review of the fund's investments made under the Gaddafi regime.

"As at the end of June 2011, (the fund) was $64.9 billion," he said. "We will come up with recommendations after our work with the World Bank and the IMF on the most ideal size for a Libyan sovereign wealth fund."

According to end of June unaudited figures shown to Reuters by Nayed and his team, 45.5 percent of the fund is in cash.

The fund also includes, according to a document obtained by Reuters, $10.8 billion in equities, $9.7 billion in bonds, $8.3 billion in strategic shareholdings, $4 billion in hedge funds, structured products and derivatives, and the remainder in other investments.   Continued...

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