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Frozen Libyan Money

The conflict between the rebels and the regime of Muammar Khadafi has lead authorities of different countries of the Western world to freeze Libyan assets and have hindered the development of hedge fund FM Capital Partners...

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Fiat, Unicredit, Pearson and even the football club of Juventus de Turin : since its creation in 2006 and in only five years, the Libyan Investment Authority (LIA) has acquired a considerable influence in financial circles, so providing a gateway into intellectual circles. Its objective was two-fold: to diversify Libya?s economic assets by moving away from the country?s excessive dependence on oil, and to improve the country?s image by constructing of a network of high-ranking personalities - some of which are principle figures of the British intelligentsia.

By becoming a partner of the London School of Economics, Libya also precipitated the resignation of Howard Davies, the Chief Executive Officer of this respectable institution, who was, in exchange for Libya?s contributions, training Libyan students to high positions of economy and finance. Since the start of the conflict in Libya, well-known names started falling one by one. Those who considered that the Libyans had finally become accessible themselves became in turn inaccessible.

But the core of the war is a financial one cemented in the western nations. In the United Kingdom, it is queen Elizabeth II who herself signed the ministerial decree preventing the central bank of Libya from regaining "physical" ownership of eight hundred million pounds (one billion euros) invested in the United Kingdom in petrodollars since 2004. London indeed became the hub of Libyan investments, in the advantage of an arabic-friendly spirit, which exits in financial circles and which the Libyan incident will not question (due to considerable Qatari influence.)

The Libyan assets in the United Kingdom are in fact much greater than the contents of the decree signed by Elizabeth II. According to specialists? estimations, the total present investments in the United Kingdom, frozen or not, amounts to about 20 billion pounds. The sensitive and easily identifiable assets were quickly suspended: as is the case with the participation of the Libyan Investment Authority - 65 billion dollars of total assets - in Pearson (who publishes the Financial Times as well as well known Penguin publications, but also two buildings in very well-known London districts, particularly that of Oxford Street and the manor house belonging to the dictator?s second son, Saif al-Islam who is the principle player in Libyan finance, in the wellto- do district of Hampstead). The LIA also possessed shares in the Royal Bank of Scotland and Finmeccanica (Italy).

The LIA had invested 800 million dollars in FM Capital Partners, a hedge fund managed by two Frenchmen: Frédéric Marino and Aurélien Bessot!

One of the most recent and most remarkable examples of the growing Khadafi family funds was that of FM Capital Partners, a hedge fund managed by two frenchmen: Frédéric Marino and Aurélien Bessot. The former had previously been the marketing director - hedge funds for Merrill Lynch after having worked for Bear Stearns, the latter being the formerly head of exotic equity derivatives of the Bank of America. The LIA had invested 800 million dollars in this new hedge fund which was created in 2009. With the Libyan guarantee, the hedge fund was expected to grow for the first time this year.

The agreement with FM Capital Partners, which is situated at 1, Knightsbridge, London in the corner between Hyde Park and Buckingham Palace, went beyond the pure financial involvement since a program geared towards training financial professionals over 3 years with the aim of supplying Libya with next generation fund managers. About forty students, some of whom came from Libya, formed a training team of traders specialized in risk management and operations, research and strategy. The strategies used by FM Capital Partners had partially been approved by the FSA (Financial Services Authority) with long/short equity, “event-driven” statistical arbitration and global macro fund.

For FM Capital Partners, this Libyan involvement - 55% of the assets, via the Libyan Investment Portfolio forms a serious contribution to undisclosed developments. The actual situation is unclear owing to the fact that it is the LIA who supervises these assets. Both parties refuse to elaborate even though the internet site remains unchanged and the HM Treasury, the British Ministry of Finance gave FM Capital Partners authorisation to continue trading after the EU had frozen the five Libyan financial entities - including the LIA and their involvement with FM Capital Partners. HM Treasury gave FM Capital Partners the right to trade as usual in the workforce, given that they do not transfer money to one of the outlawed parties. Namely the main shareholder of the hedge fund...

This authorisation given to FM Capital Partners? activities did not ease concerns in the markets. “Due to the current difficulty to raise assets, these ties with Libya will probably raise questions and cause problems, specifically with regards to reputation”, reckons Jerome Lussan, founder of the LLP in London, who investigates hedge funds for investors.

A major part of FM Capital Partners positions is actually quoted on the Stock Exchange, which leads the partners to affect a large number of investors both near and far and exposes the banks to a bigger risk, specifically in the case of a large amount of over-the-counter trading. Since the adoption of european directive management last month, a certain unease among traders exits towards FM Capital. The collateral victims to these financial sanctions are numerous and yet rarely implicated in the complexities of Libyan politics.

JH , April 2011

Article also available in : English EN | français FR

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