Thursday, April 22, 2010

Sovereign Wealth Fund?

Nigeria mulls sovereign fund for oil wealth: minister
Aganga said a proposal for the sovereign fund will be presented to the federal cabinet next month for approval, and that the plan was expected to be launched in the next three months. (Read More...)

Hmmm. Good. But...
Previously, on this blog


t said...

Pros and Cons:

First, as the Minister is quoted to have said: BEST PRACTICES. Everybody is doing it / has done it. Nowadays, you manage money, make funds with desired characteristics, like either to stabilize the accounts or to make more money (geometrically, like on Wall Street etc.)

On the other hand:
My zen side does not like the world of hyperfinance. The global financial crisis showed us that we don't REALLY understand derivatives, and common sense tells us that we're not likely to increase our understanding greatly as long as the short-term rewards remain. Who cares about the occasional market crash? (Actually, investors like Buffett and Soros do.)

The big issue, other than the unbalancedness of modern finance: Implementation. In Nigeria, that is an issue. I hope our corrupt system can tolerate a managed fund. I also wonder where the loyal manpower is that will manage this money. Basically, I assume that the expertise is NOT present in Nigeria (though it likely is present among some Nigerians, overseas.) Or maybe it'll just be managed by a foreign bank? Wow, weird.

In the end, there is some inevitability, that even if moves like this drag us into very great risk, sooner or later it will happen: we will join the global market.

t said...

on long-term characteristics of derivatives-driven financial markets: i now believe that in the end, it will be alright. what i mean is that although derivatives currently intensify bubbles (and crashes) , eventually they will be seen to have stabilized markets, since highs and lows that happen in such rapid succession can scarcely be perceived.

More like this in my upcoming math blog.

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Previously on UpNaira