World Bank Hedge Fund
World Bank Arm Invests $100 Million in NY Hedge Fund
The World Bank has made an interesting investment: $100 million to a young hedge fund. International Finance Corp, a part of the World Bank, has a history of investing in private equity funds but this is the first attempt to invest in hedge funds. The move is part of an attempt to help banks with new capital requirements. Christofferson Robb & Co. CRC will receive $100 million and look to raise $300 million from outside investors.
The fund will put up cash to cover unexpected loan losses in return for a cut from the bank. The fund’s cash will lower the banks’ requirements under the Basel capital rules and reduce the impact of planned tighter rules. IFC hopes the fund will encourage an extra $2.5bn to $4bn of lending to developing countries.
Xavier Jordan, chief investment officer at IFC, said there was a risk that banks facing new capital demands would cut back their riskier loans in order to hoard capital. “It’s the implications about constrained access to capital for European banks and the implications for emerging markets,” he said.
The fund will operate mainly with big international banks. They will be required to recycle the money freed up by the “bilateral synthetic capital release securities” that the fund creates back into developing markets.
IFC has been criticised in the past by some aid groups for involvement in structured products and derivatives. Source
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