SWFs wary of bail-outs.

Sovereign wealth funds (SWFs) are "particularly cautious" about bailing out distressed companies and are also diverting funds "to add stability and economic stimulus to local markets", according to a survey by Financial Dynamics International (FD).FD interviewed senior executives from "a number of the world's leading SWFs - whose total assets accounted for well over 50 per cent of the $5 trillion worth of collective global funds currently held by the SWF asset class". The interviews showed that SWFs are conservative about participating in further bail-outs of companies in financial difficulties given that "a number of such funds are currently sitting on major capital losses from previous investments", the consultancy said. "Having supported some of the earlier capital raising of distressed banks, we are not planning to make any follow-on investments of a similar nature," one SWF executive said. The executives also said that cash was being diverted from their global portfolios to help their home economies. "Although the objectives of our fund are solely international, we are slowing down our overseas activities whilst we firstly wait for market conditions around the world to stabilise - and secondly we have seen funds diverted to support a variety of local stimulus packages," one executive said. SWFs are broadly adopting a very cautious approach to the current market, expecting better value to materialise later this year, according to the survey. "We are ready to re-enter the market in a major way - but not for several months given that we are sure prices are only heading down," one executive said.

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