Libyan Investment Authority’s post-Gaddafi plans revealed

By:
Chris Wright
Published on:

AbdulMagid Breish, the chairman and acting CEO of the LIA – the man who launched litigation against some of the biggest names in global banking – reveals the sovereign wealth fund’s plans for the future and the battle to move on from Gaddafi-era investments.

Thanks to exhaustive efforts by Deloitte – at least the fourth big advisory name to work for the LIA, following Ernst & Young, Mercer and KPMG – Breish can now state with confidence that the fund has $66 billion in assets, roughly half of it invested in a legacy of direct equity stakes in some 550 companies worldwide, and the other half in a mixture of equities, alternatives, bonds and cash.

Breish’s first priority is to find the staff to manage this money properly, he tells Euromoney in a wide-ranging interview. The CEO must be Libyan, "for obvious reasons," he says, although not everyone agrees with that caveat. "If we have a highly successful Spanish coach of the national football team [Javier Clemente, who just helped Libya win the African Nations Championship, the team’s first international title], why can’t we have a foreign head of the LIA?" asks one Libyan banker. "Why can’t we just get the best person?"

For the many other roles, "those do not have to be Libyan," Breish says. "If they are, that’s OK, but we are looking for quality and skill base and experience."

LIA AbdulMagid Breish
AbdulMagid Breish, the 
chairman and acting CEO 
of the LIA

To help them attract the "really high-calibre people" Breish says he wants, the LIA is about to open a new office in Malta to go with the one it already has in London. The idea is that if the right people can be found but they don’t want to live in Tripoli for reasons of family or schooling or security, they can be based in Malta and commute back and forth as needs be. Meanwhile London, Breish says, will be "the kitchen for the LIA. Most of the discussions with the asset management industry will occur here, and all the top skills and executives we can’t house in Libya." London will be the centre for disaster recovery, too, and will provide the IT platforms and much of the training.

The next task is to get the funds unfrozen. Like Derregia before him, Breish is keen to point out that the funds are frozen at the say-so of the Libyans themselves, not, any more, because of the UN. Both men are wary of funds being released before there is a clear framework for their subsequent investment. "We were asked about a year ago whether we would want to unfreeze. The answer was no. When I was nominated in June I was asked the same question by the prime minister and I said no. We’ve missed a lot of opportunities along the way to readjust our portfolio. But I think the practical way is to unfreeze when we have the logistics, the infrastructure and the skill base."

Once that’s done, a clear investment strategy will be set, very possibly along the lines of the four-inch-thick Mercer document that was shelved after its delivery back in 2009, to the considerable annoyance of people who worked there at the time. Asked if the Mercer study could be revisited, Breish says: "Definitely, yes. Previous administrations brought in a lot of consultants that did a lot of hard work and produced a lot of pamphlets; I’m not sure these were read or followed through. We intend to use best-of-class expertise, be it consultants, asset managers, lawyers, custodians or what have you. We aspire to bring LIA back into the international fold like the rest of the sovereign wealth funds: the same line of thinking, the same corporate governance, the same transparency and methodology. There shouldn’t be any reason we can’t do that."

Asked for a role model among existing SWFs, Breish says, "from a corporate governance standpoint, we would want to emulate… the New Zealand to the Australian to the Canadian to the Norwegian, that depth of disclosure."

The likely structure will be a future generation fund, which will look something like the Abu Dhabi Investment Authority or the Kuwait Investment Authority, with a certain percentage of oil proceeds going to it every year; then a budget stabilization fund, within which excess reserves can be placed to assist the government in funding the budget deficit, with the approval of Congress; and a local fund that will act as a catalyst to private-sector development in Libya, particularly in infrastructure.

And in good news for the world fund manager community, which has been watching Libya with increasing curiosity for some time, Breish says: "LIA would not be following the previous model of investing on its own and managing assets on its own. We would be investing and managing assets through external fund managers. Decisions are going to be made by committee, and no decisions are going to be made by one person or one investment analyst or fund manager or whatever was the case before." Gone, it seems, are the days of the Gaddafi family directing the fund to invest in Juventus football club because it seemed like a good idea at the time.