Rumi Masih, senior investment strategist for BNY Mellon’s Investment Strategy and Solutions Group (ISSG), said that it appears to be counter-intuitive, but a sovereign wealth fund that is sensitive to changes in commodity prices should begin moving into more liquid assets as commodity prices are peaking instead of waiting for them to decline.
Masih made the comments during a roundtable discussion including BNY Mellon investment professionals and a senior advisor to sovereign institutions.
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"Sovereign wealth funds, like other large institutional investors, are trying to apply the lessons of the last financial crisis," said Masih. "That way, they can be more nimble if another crisis occurs."
Masih added that sovereign wealth funds could develop signals that could trigger moves to increased liquidity. He said such warnings could be customized depending on the drivers of a nation’s economy.
Sung Cheng Chih, former chief risk officer for the government of Singapore Investment Corporation (GIC) and currently a consultant to several sovereign institutions, said, "The financial crisis highlighted the importance of preparing for contingencies, with some funds now seeking to create risk dashboards based on pre-agreed signals for portfolio de-risking."
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