Libya lost billions of dollars on sophisticated financial products sold to Moammar Gadhafi's sovereign wealth fund by some of the world's leading financial institutions, according to a confidential Libyan government document.
Banks and hedge funds led by France's Société Générale are named in about $5-billion (£3-billion) of deals involving the oil-rich nation, some of which had resulted in heavy losses by the middle of last year.
One of the most striking losses, outlined in an internal report for the Libyan Investment Authority, was a 98.5 per cent fall in the value of the sovereign wealth fund's $1.2-billion equity and currency derivatives portfolio.
The disclosures - in a document obtained by the campaign group Global Witness - raise more questions about the west's enthusiastic engagement with Libya, in spite of the Gadhafi regime's reputation for brutality and corruption.
Robert Palmer, campaigner for Global Witness, said: "It's striking how many top financial institutions were prepared to do business with the Libyan regime, given the obvious concerns over the potential misuse of state assets for personal gain."
The report for managers of Libya's sovereign wealth fund, dated June 30 last year, said its bank and hedge fund investment products had fallen in value from about $5-billion to roughly $3.5-billion, out of the body's total assets of $53.3-billion.
Three deals set up by SocGen had plunged from an initial value of $1.8-billion to $1.05-billion, the report said, with a $1-billion Europe-focused product losing 43 per cent of its value in the preceding three months alone.
Investments in products bearing the names of JPMorgan, Credit Suisse and BNP Paribas also showed significant falls in market value.
Structured products are typically derivatives-based transactions tailoring investments to a client's specific demands.
SocGen said it could not comment on individual customers and deals, adding that it dealt with many sovereign funds and complied with all applicable rules and regulations.
The other three banks did not respond to questions about the document.
The LIA also did not respond to a request for comment.
Many Libyan government bodies, including the LIA, are in turmoil because of the civil war. Officials are mostly reluctant to talk publicly.
Many of the LIA's assets are frozen under the international sanctions against the regime. The U.S. and Britain have frozen more than $55billion, out of total Libyan foreign assets estimated at $150-billion. The LIA is also a shareholder in Pearson, owner of the Financial Times.
The LIA management report also reveals that the authority had significant interests in some of London and New York's most prominent hedge funds. The LIA invested $300-million with Och-Ziff, the New York-listed hedge fund manager. Och-Ziff declined to comment.
Additional reporting by Lina Saigol and Henny Sender
Copyright The Financial Times Ltd. All rights reserved.
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