Kuwait's SWF Considers GM Stake; Future Fund Calls for EU Stability

(November 17, 2010) — Kuwait Investment Authority may purchase a stake — reportedly 1% or less — in General Motors (GM) after the carmaker issues its initial public offering later today.

According to Gulf News, the automaker has been approaching several sovereign wealth funds in the Middle East for its IPO, including Saudi Arabia’s Kingdom Holding, Abu Dhabi’s Mubadala, and Qatar Holding, a subsidiary of the Qatar Investment Authority (QIA). GM has also been in talks with Singapore’s Temasek Holdings, the investment arm of the Singapore government.

“Last week, they announced the price range, which is the valuation range,” the CEO of the Kuwait Investment Authority, Bader al Saad, told reporters in Kuwait City. “We have to review if it is feasible for us. If it is feasible for us we will look into it. If it is something cheap, we are interested of course.”

Detroit-based GM revealed the estimated terms of its planned IPO with plans to raise as much as $12 billion in the second-largest US initial public offering on record, after San Francisco-based Visa Inc.’s $19.7 billion sale in March 2008. A filing with the Securities and Exchange Commission showed GM, which is 61% owned by the US Treasury, is now selling 365 million shares at $32 to $33 each. GM will be added to the Wilshire 5000 stock index Friday, if the IPO is completed by then.

In other news regarding the world’s SWFs, Australia’s $67.4 billion Future Fund is seeking stability from the European Union, the Wall Street Journal is reporting.

The sovereign wealth fund’s chairman David Murray told the newspaper that he must have guarantees from Europe if the fund is to invest in debt from the stability facility that could be used to bail out Ireland. The concern from the chairman reflects the wariness among investors regarding Europe’s commitment to the European Financial Stability Facility (EFSF), set up in May and backed by 16 euro-zone members.

Murray told the WSJ that the Future Fund would only invest in debt from the EFSF if Europe shows unity. “It depends entirely on who explicitly supports that fund,” he told the news service. “I question what the form of commitment are from the other members.”

The Future Fund, which manages the Australian government’s public-sector pension liability, has a 20% allocation to fixed-income securities — an allocation that ranks second to equities.