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Libyan sovereign wealth fund invested € 1.8 billion in Société Générale structured products!

According to an official document published by Global Witness, the French bank held the lion share of Libyan funds allocated to structured products...

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Libyan Investment Authority (LIA), which managed $ 53.3 billion in assets in 2010 is said to have invested $ 3.45 billion in structured products. Société Générale has received more than half of those funds dedicated to structured products, about $ 1.8 billion.

The French bank did not really manage to grow that capital:

- A billion dollars was invested in the product Soc Gen Europe Meduim. At the end of the first half of 2010 the value of this investment was 284.5 million dollars, a 71.55% loss.

- $ 500 million had been invested on the product Soc Gen Strategic Equity Fund Codeis. At the end of the first half of 2010 the value of this investment was $ 567 million, an increase of 13.4%.

- And finally $ 300 million had been invested on the product Soc Gen -Cross Roads 5Y Link Notes. At the end of the first half of 2010 the value of this investment was $ 204.3 million, a 32% loss.

In total, $ 1.8 billion managed by Société Générale was worth only 1.055 billion, resulting in a capital loss of 41%! As a result of international sanctions given to Libya, the funds are blocked and continue to be managed by the bank until further guidance from the European Union on this issue.

Several other banks also welcomed Libyan funds for investments in structured products. Deutsche Bank, Credit Suisse, Commerzbank, and JP Morgan have each raised nearly $ 200 million, which were invested without better success.

In addition, $ 300 million had been invested in a CPPI fund at Lehman Brothers, the LIA does not seem to have been reimbursed.

$ 600 million were invested in hedge funds. Palladyne placed $ 300 million in its Palladyne-Quant Fund Global Diversified, which were worth 267 million in mid-2010 while Och-Ziff has allocated $ 150 million on the OCH-ZIFF- Global High Yield Hedge Fund, and $ 150 million on the OCH-ZIFF- overseas fund II Hedge Fund. Assets that were invested with OCH-ZIFF gained 10% by mid-2010.

On the overall, alternative investments on which funds were placed (hedge funds, segregated accounts, structured products, Private Equity, Derivatives) suffered heavy losses. The $ 5.4 billion invested in alternative products were only worth no more than $ 3.9 billion, resulting in a 27% loss.

In addition, 1.25 billion dollars, invested in equity derivatives, mainly puts and forwards - on EDF ($ 175 million), Citigroup ($ 200 million), ENI ($ 150 million), etc ... – were only worth $ 20 million. Was it a hedge of the equity portfolio? The Libyan fund management has not yet revealed all its mysteries.

Maxime Onan , May 2011

Article also available in : English EN | français FR

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