NewsmakersMay 16, 2023

Kosovo Launches Sovereign Wealth Fund

The strategic/development fund will likely be seeded with stakes in six major government-owned companies.

Reported by Michael Katz

The Republic of Kosovo officially launched a sovereign wealth fund on May 7.

According to financial boutique and pension fund tracker Global SWF, which was invited to the launch and presented a market update to the prime minister of Kosovo, the fund will take the form of a strategic/development fund. It is expected to initially be seeded with stakes of less than 51% in six government-owned companies: Trepča Mines, Kosovo Energy Corp., postal services provider Post of Kosovo, Telecom of Kosovo, infrastructure company KESCO and Kosovo Railways.

In addition to managing the companies, the fund also aims to facilitate foreign direct investment from other sovereign wealth funds. The fund will also likely be governed by a non-executive board set up by Kosovo’s government, comprised of four to six independent members, which could include international advisers.

“The government stands strongly behind this vision of the sovereign fund, believing that such an initiative will result in stabilization of the economy through diversity, creation of profit for the state through wise investments, generating wealth for generations to come,” Kosovo Prime Minister Albin Kurti said in a statement.

According to a spokesperson for Global SWF, the management team and portfolio of the sovereign wealth fund have not yet been defined. While some assets have been identified to be transferred, they have not yet been valued.

The fund is expected to comprise a relatively small team, according to Emanuel Bajra, a member of the working group set up by the Kosovan government to establish the fund. He told Global SWF that the CEO could be recruited externally to “bring best practices from global capital markets and sovereign wealth funds.” He added that the design of the fund’s governance and accountability is still evolving, “but we are confident it will have no political influence.”

Bajra also said the fund’s intent is to “intensify and solidify” the financial services and mineral sector, which include lithium, gold, chrome and lignite mining.

“Once the fund is established, we can pursue two different routes: either target-specific SWFs to discuss partnerships or go on road shows,” he said. “But this will in any case come after we have absorbed the six major assets and ensure the profitability and financial sustainability of our portfolio.”

Kosovo, a province of the former Yugoslavia, declared its independence from Serbia in 2008. It is recognized by more than half of United Nations member states but cannot join the U.N. due to objections by two permanent members of the Security Council, Russia and China. Kosovo applied for European Union membership in December 2022.