British Site: After years of negotiations, the UN is expected to unfreeze $70 billion of Libyan assets abroad

The British website Geopolitical Monitor reported that the Libyan Investment Authority expects the United Nations to unfreeze its $70 billion assets by the end of the year. After a series of institutional reforms and years of negotiations with the UN Security Council, the unfreezing of assets would enable the fund to make new investments and transfer capital from accounts with low interest rates.

According to the website, an audit conducted by Deloitte in 2020 revealed that the Libyan Investment Authority suffered a potential loss of $4.1 billion in returns on its equity portfolio since the freeze began in 2011. Since 2019, the Libyan Investment Authority has sought to implement a major transformation program that would allow the fund to compete with similar sovereign wealth funds in the Middle East. This program includes capacity building, increased transparency, and working with the UN to lift the asset freeze through a four-step transformation plan.

The website also mentioned that the UN Security Council passed Resolution 2701 in October 2023, agreeing to consider changes to the asset freeze. The investment plan presented in March 2024 outlined short-term strategies and reallocations that the Libyan Investment Authority plans to pursue once the freeze is lifted, including recovering losses.

The ongoing challenges faced by the Libyan Investment Authority have been complicated by the significant decline in the value of its holdings. An audit conducted in 2012 revealed that about 40% of the 550 companies affiliated with the institution were unprofitable and needed to be sold. Twelve years later, many companies are likely still unprofitable, increasing the need for a comprehensive restructuring of the institution’s assets. Furthermore, the inability to uniformly enforce the asset freeze has allowed new deals to be made since 2011, many of which were not reported in audits and surveys of the Libyan Investment Authority’s assets, hindering regulatory efforts to estimate its full portfolio.

The transformation plan of the Libyan Investment Fund was launched in 2019. Since then, the CEO and executive team have ensured that the Libyan Investment Fund provides annual reports to the International Forum of Sovereign Wealth Funds, a leading forum for transparency and governance in sovereign wealth funds, in line with the Santiago Principles.

These efforts have greatly improved the transparency of the Libyan Investment Fund, with GlobalSWF ranking the Libyan fund 51st among 100 sovereign wealth funds in terms of sustainability and governance for 2024, compared to 98th in 2020.

The website emphasized that this institutional transformation has strengthened the Libyan Investment Authority’s position within the UN Security Council to request the lifting of the asset freeze. While the investment proposal submitted to the UN in March 2024 only outlines a short-term plan, the Libyan Investment Authority maintains a long-term strategy that will be implemented once access to the frozen assets is granted.

The website also noted that while the document submitted to the Security Council remains confidential, the Libyan Investment Authority’s 2021-2023 strategic document highlights its future aspirations. The first step in its strategy addresses three problematic areas: building trust, capacity building, and developing better investments. While the first two areas have largely been addressed since 2020 through internal reforms, the third remains incomplete, partly due to the asset freeze.

The Libyan Investment Authority estimates that other sovereign wealth funds in the same group, especially in the Middle East, achieve annual returns of 6-7%, and the Authority aims to reach this benchmark after the freeze is lifted. Their plan includes reallocating underperforming assets, bringing in external managers, creating a smart compliance system to maintain a level of international oversight, and unifying asset and portfolio classification across all subsidiaries. An internal investment committee will also be established.

According to the website, the initial reallocation process will mainly derive from cash-strapped assets affected by the freeze and other sanctions. According to the Libyan Investment Authority’s documents, all other assets are likely to remain frozen.