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.

Is Breish an old hand or a new broom?

Life and logistics are still not simple in Libya. A lot of damage has been done that cannot be fixed overnight. “Everything in Libya, every apartment building or inch of asphalt for a road, involved corruption and fees,” says one Libyan. “In every sector – oil, construction – there is a cloud of doubt hanging over it, not just the LIA, and there is no sense in singling out that one institution.

“Libya was an unjust society, with a small regime-backed elite making millions in public-sector jobs, while the rest of the population had to make do on a pittance under law 15 of 1981 [which froze wages for several decades]. There was no meritocracy and no market mechanism to determine how people were rewarded for their efforts.”

The tension between those who want change and those who thrived in the old guard is important to understand when assessing the changes taking place at the LIA itself. One Libyan explains: “There was, and is, a feud between the old and new guard.”

LIA Al-Saadi Gaddafi
LIA assets were the playthings of the Gaddafi family. Al-Saadi Gaddafi (c, bottom),
for example, took a 10% stake in Italian football club Juventus

So where does Abdulmagid Breish fit into this picture? For all his new-broom rhetoric it is illuminating to note that, according to documents acquired by Euromoney, he was a member of the LIA’s board of trustees at the outset back in 2007. Decree 130 of that year names that board in full, and it is quite a list: The then-prime minister, Baghdadi Mahmudi, as chair (the document bears his odd right-angled slash of a signature), the deputy prime minister as deputy chair, and people including the planning minister, finance minister, central bank governor and some of Gaddafi’s bankers as members, along with Breish and the former CEO of the LIA, Mohammad Layas. Mahmudi, for one, was extradited from Tunisia to Tripoli in 2012 to face trial on misuse of public funds, among other things. It’s a list that appears to put Breish at the heart of the old regime.

For this reason, some in Tripoli despair of ever really moving on from the old days, and see Breish’s appointment as emblematic of a system in which the same people end up in power regardless. “There are 30 years or more of roots, experience and networks,” one Libyan says. “We haven’t been able to progress. The same people are coming back and calling themselves heroes.”

Is this fair?

Asked about his history on the LIA board of trustees, Breish is open about it. He was there “at the outset,” he says. “At the very beginning, 2006/07, I attended two meetings and then I was replaced.” So his involvement was brief? “Very brief. The problem was they called for meetings the next day. And I wasn’t living in Tripoli, I was in Bahrain.” At ABC? “Exactly. So I never made most of the meetings, only two, and I found it very difficult to follow through and half of the time I wasn’t there.”

This stacks up: Breish was indeed at Arab Banking Corporation at that time (Mohammad Layas, the LIA’s then-head, was chairman of ABC at the time).

Was Breish in any position to see the deals that were going through at the time?

“No, no. As a matter of fact, I was the one who suggested to the administration to pick up Mercer, to advise them on risk.”

And should he be seen as a part of Libya’s old guard?

“Not exactly,” he says, apparently neither offended nor alarmed. “We were all technocrats.” He was outside Libya, chiefly at ABC, from 1980 to 2009, he says, and certainly worked with Libyan institutions such as the central bank throughout. “Of course, being Libyan, yes I did assist some of these institutions. I advised them and they saw merit in my experience and they asked my advice, but it didn’t mean that I agreed with their policies or was one of the inner circle. So I don’t think it has any connection.”

Breish is not the only familiar face at the new LIA. Ali Baruni, a long-term adviser and a member of the LIA Advisory Committee, is said to be back as an adviser, and Sami Rais is believed to have applied for the CEO job and to be the front-runner for a treasury role. Bitterly ousted Derregia is understood to be in the frame for his old CEO job barely a year on from losing it.

Asked about the prospect of former employees coming back again, Breish says: “Well, it’s open. They’ve spoken to me, I know Sami Rais well, I know Derregia, I know a lot of other people. They can put their name in. We have a process, we have specialist interviewers who will interview them, we’ve got psychometric and in-depth analysis.”

He smiles. “Let the best man win.”