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1© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Strategic Risk ManagementStrategic Risk Management
African Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
An alternative view for investing An alternative view for investing huge revenue windfallhuge revenue windfall
Drawings: The Economist
NOT AN OFFICIAL UNCTAD RECORD
2© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Bests Asset Managers are different!Bests Asset Managers are different!
Yale endowment: an alternative view for investing reserves
Sources: Data consolidated from ”The Yale Endowment 2005 Report”
% Allocation de capitaux
1) Alternative Asset Management
2) Average Value of University American Funds (06/30/2005). Past Yields do not herald future results
(2)
(1)
Present Stand
2005 To30/06/05
2003 1999Institutional Average (2)
ExpectedReal return
Risk
Domestic Equity 14,0% 14,1% 14,9% 15,1% 32,0% 6,0% 20,0% 15,7%
Absolute Return (1) 25,0% 25,7% 25,1% 21,8% 17,6% 6,0% 10,0% 13,1%
Foreign Equity 14,0% 13,7% 14,6% 11,1% 17,4% 6,0% 20,0% 12,7%
Private Equity 17,0% 14,8% 14,9% 23,0% 6,1% 11,4% 29,0% 39,5%
Real Assets (3) 25,0% 25,0% 20,9% 17,9% 7,5% 6,0% 15,0% 17,7%
Fixed Income 5,0% 4,9% 7,4% 9,6% 19,5% 2,0% 10,0% 7,4%
Cash 0,0% 1,9% 2,1% 1,5% 3,5%
Total 100% 100% 100% 100% 100,0% 6,0% 11,1% 17,4%
% Capital AllowanceAnnualized Yield(10years-return from 06/2005)
3) Include Real Estate/Oil & gas/Timberland
3© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Bests Asset Managers use active management Bests Asset Managers use active management
Yale Diversifies Policy Asset Allocation : Target 1985 - 2005
Sources: Data consolidated from ”The Yale Endowment 2005 Report”
4© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
African Oil Companies have a social African Oil Companies have a social responsibilityresponsibility
In real term, 2005 extra revenue nearly doubles 1974 and 1980 dollar surpluses
• To face, oil price volatility and declining reserves, windfalls have to be invested in: – oil production and refining capacity, – the world's biggest companies,
– private equity deals at home and abroad
5© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Capital flows are flooding, but Africa is missingCapital flows are flooding, but Africa is missing
Source: Thomson Financial-L’Expansion
CNPC/EnCana (Pétrole)
CVRD/Canico
MinesMittal Steel/Arcelor
Acier
Casino/CBDDistribution
Tata/Millenium SteelAcier
TMNF/Real SegurosAssurances
Nanjing Auto/RoverAutomobile
Mittal/KrivorijstalAcier
Telefonica/O2Telecoms
Hyop/UnicreditoBanking
South/ North
South/ South
North/ South
North/ North
Oracle/I-FlexSoftware
6© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Africa does not appear as well in the Africa does not appear as well in the information loopinformation loop
Source: MichelCartier.com La carte internet du monde
Internet World Map
7© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
• Safe and hospitable investment environment where profitable opportunities exist
• Local financial market
• Domestic Corporate finance and Fund management capability
• Technology transfer via financial investments
• Professional platform for M&A.
What miss African Oil CompaniesWhat miss African Oil Companies to be part of the game? to be part of the game?
8© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
• Mix increase Oil production capacity with traditional financial investment, private equity at home and abroad
• Take a long term view for managing revenues,
• Enable the development of competencies poles in Energy, Telecoms, Software, Health care, Finance, Tourism, etc...
• Be inspired by Kuwait and South Korea experiences in investing in less cyclical asset in complement to oil investments,
• Create Partnerships controlled by Oil companies with independent financial professionals.
How to achieve it?How to achieve it?
9© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Present and alternativePresent and alternative
1. Direct co-investments and partnership in Oil project and companies
Direct investment
Oil Company
Financial Advisor
Fund 1
Fund 2...
Fund 10
2. Investment via several investment funds
3. Mix investment via Partnerships controlled by oil companies
Oil Company
Controlled Partnerships
Real estate
Companies 1, 2,…10
Alternative funds
Oil Company
10© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Kuwaiti & Korean ExperiencesKuwaiti & Korean Experiences
Kuwait Investment Office (KIO) manage reserves for future generations.
10% of oil revenues, Mix portfolio invested in all type
of asset classes and geographical zones,
Long term horizon and own financial teams,
100 people Kuwaiti and non Kuwaiti
ETRI (Electronics and Telecommunications Research Institute), create the conditions of a long term value creation for future generations
ETRI focus on Industrial Property on four axes : Technology Transfer, Patents, Start up creation, Consulting and
infrastructure for business development.
Emergence of world leaders
Kuwait, a financial approach Korea, an industrial approach
11© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
KUWAIT, a financial approachKUWAIT, a financial approach
KIO wants to be a first class asset management company with a complementary mission for developing excellence in the Kuwaiti private sector :
Contribution to Kuwaiti human capital education and training Active participation to investment growth in Kuwait Transparency in operations and application strong governance Development of a dynamic and motivated enterprise environment Constant research of improvement in its investments process.
Controlled by the Board of the Kuwait Investment Authority, mother company, chaired by Minister of Finances, with as members :
Oil Minister Central Bank Governor Finance Secretary Five other Kuwaiti experts on investments and finances of whom three are
totally dedicated to this task
12© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Korea, an industrial approachKorea, an industrial approach
Electronics and Telecommunications Research Institute (ETRI) has been involved in more than 2.700 enterprise projects and more than 1.400 Technology transfers
ETRI spread over 264 companies mainly in Korea and abroad (Singapore …)
Today these companies represent more than 4.000 stable employees and annual revenues of WON 700 bln.
Some of these Companies are World leaders in domains like mobile phone, flat screens, or computers components.
With more than 3.500 international patents, ETRI is just behind American AT&T et IBM.
13© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
How to implement it?How to implement it?
– Build an investment platform with a 5 to 8 years time horizon,
– Hire an experienced professional team dedicated to complement actual investment with additional asset classes such as Private Equity, Alternative investment and Real estate, at home and abroad,
– Immerge in-house talents to be part of the team with purpose to train them to the best practice of Corporate finance & Asset management,
– Align the interest of team members with those of the structure to be sure to keep the bests,
– Transfer technologies from investment abroad to local market,
– Use the expertise of your platform team for your own M&A operations.
14© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
CD1 CD2 J1 CD1 CD2 J2CD1
How it could be structured?How it could be structured?
Operational Partner
Investment Committee
Oil Co partnership
Oil Company
DO1 DO2 DO3 DO4
F/O* B/O* IT*M/O*
A1
A2
A1
A2
A3
A4
Sec 1
Compt.
Oil co personal
*F/O Market Operations; M/O Post Market Operations; B/O Operations Management; IT Information Technologies; CD Department Managers; J Lawyer; A Deputy Manager; Sec Assistant;Compt Accountant
15© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Where is the Value?Where is the Value?
Oil CompanyLimited Partner
General Partner
General Partneracquires
companies and alternative assets or real estate
General Partner
adds value to investments
through
• Operational Experience,• Capital Markets experience,• Structuration Experience,• Board Involvement.
General Partner
Sold-out Investments Portfolio:
• IPO,• M&A• Recapitalizations• Transfers & Arbitrations for
Alternative Assets and Real Estates
Cash and/or stocks
99% Capital
Profit & returnOf capital
Carried interest1
16© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Expected benefits from this type of structureExpected benefits from this type of structure
Technology Transfersand Education
Financial Performance
Diversification and Risks reduction
Portfolio Management Methods Techniques of M&A, LBO, Structured Finance, Alternative Assets
Management Strategic Risk Management & Coverage Governance Regulations imposed by Venture Capitalists (Rigor &
Transparency) Industrial Technologies from acquired companies
Access to unique opportunities in a vast & growing marketplace of privately held companies
Low correlation with other Asset classes Private Equity and Alternative Assets
Management as Risks mitigators
Long Term Value Creation
Professional Team & Regulatory Environment
Access to a large pool of professional resources Adapted Regulatory Environment
Financial Output over 10% High & Effective degree of influence & control over Investments Legitimate access to non-public information before investment-
decision Strong alignment of Interests between Investors & Management
17© 2004 Strategic Risk
ManagementAfrican Oil Conference - Algiers, April 4th, 2006African Oil Conference - Algiers, April 4th, 2006
Strategic Risk ManagementStrategic Risk Management
Jean-François Casanova52, rue de Ponthieu 75008 Paris
Tel : +33 (0)1 45.62.16.64Mobile: +33 (0)6 15 38 64 08
E-mail : [email protected]
For any Question :For any Question :