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Merrill Lynch makes play ahead of Sovereign Wealth Fund establishment

Oct 18, 2018 News

United States wealth management entity, Merrill Lynch, has started engaging Guyana ahead of the implementation of the Sovereign Wealth Fund (SWF).
Officials of the company met separately in recent weeks with Minister of Foreign Affairs, Carl Greenidge and Central Bank Governor, Dr. Gobind Ganga.
Greenidge said that Merrill Lynch requested the meeting, because they may have an interest not only from a wealth management perspective, but as a merchant bank willing to lend money for infrastructure development.
“Our function as the Ministry of Foreign Affairs is really to listen to them and channel them to the appropriate agency. We listened to them, explained what we are doing in a variety of areas, and facilitated a meeting between themselves and the Ministry of Finance,” Greenidge stated.
He indicated that the firm has not indicated fully its interest in Guyana.
“I know that they have capacity and experience in the management of the equivalent of Sovereign Wealth Funds, and we did not discuss with them their interest, but we did explain what we have in place, and they did indicate that they would take it up, as recommended, with the Ministry of Finance,” Greenidge stated.
The Foreign Affairs Minister indicated that although Merrill Lynch has not done much recently with Guyana, the firm worked previously with Central Bank.
Merrill Lynch, the hard charging bull of the global financial services industry, was once considered the world’s largest brokerage. The firm generates wealth for its clients through a variety of investment vehicles, including the stock market.
In 2008, at the height of the U.S financial crisis, it nearly collapsed, and was acquired by Bank of America.
The Guyana Sugar Corporation Pension Fund, called the Sugar Trading Enterprise Pension Scheme (STEPS) suffered losses with the meltdown of Merrill Lynch.
It was not clear how much of the fund’s 24% overseas investment portfolio was invested with Merrill Lynch.
Government’s Green Paper on the management of oil revenues sets out that the Ministry of Finance will manage the Natural Resource Fund (NRF), which will include revenue injections from oil and gas, mining and forestry.
The Green Paper states that the Ministry of Finance will manage requested withdrawal from the fund in the annual budget proposal.
The Ministry will also be responsible for calculating the fiscally sustainable amount, drafting the investment mandate, and entering into the operational agreement with the Bank of Guyana.
Additionally, the Green Paper highlights that the Ministry of Finance will appoint a five-member Macroeconomic Committee, which will determine the economically sustainable amount for the fund.
Further, the intention is to have the Minister also appoint a seven-member Sovereign Investment Committee, which would be responsible for advising the Minister about the fund’s investment mandate.
Apart from funds being transferred to the national budget, the Green Paper notes that NRF investments are to be made in overseas markets.
The vision for this, according to the Green Paper, is that this will serve to ensure that the country has a long-term stable source of income, which will allow for the fund to meet its stabilisation and intergenerational savings objectives.
The vision articulated by Government is to have a private manager administer the overall investment portfolio.

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