Libya’s secretive sovereign wealth fund has $32 billion in cash with several U.S. banks each managing up to $500 million, and it has primary investments in London, a confidential diplomatic cable shows. The cable, obtained by WikiLeaks and revealing the details of a January meeting between the head of the Libyan Investment Authority (LIA) and the U.S. ambassador in Tripoli, comes as the United States and European governments explored the possibility of freezing assets belonging to the Libyan government.

LIA, the umbrella body for Libya’s sovereign funds managing oil windfall revenues, is estimated to manage assets of around $70 billion with stakes in European bluechips such as Italian bank UniCredit and British publishing group Pearson .

LIA’s Mohamed Layas told the U.S. ambassador at a Jan. 20 meeting that the fund operated with high liquidity and was not concerned about the volatility in the oil market.

“We have $32 billion in liquidity, mostly in bank deposits that will give us good long-term returns,” the cable quoted Layas as saying at the meeting at LIA’s office overlooking the Mediterranean Sea.

It was not immediately clear whether $32 billion represented the fund’s total assets under management or its cash component.

The cable said of Layas: “He explained that several American banks are each managing $300-500 million of LIA’s funds … He noted that the LIA’s primary investments are in London, in banking and residential and commercial real estate.”

LIA is one of the most opaque sovereign wealth funds in the world, with strong links to the government. In a rare annual report in 2009 it said it had more than 78 percent in “short-term financial instruments abroad”.

Layas said that LIA preferred doing business in London than in the United States due to the ease of conducting business and a relatively uncomplicated tax system.

LIA, through its African investment arm, has placed several hundred million dollars of its assets with London-based FM Capital Partners, created by former Merrill Lynch and JPMorgan asset manager Frederic Marino in 2009.

The cable said that LIA controlled at least seven subsidiary operations.

The United States and European Union governments are considering possible sanctions against Libya that include asset freezes.

LEHMAN, MADOFF CONNECTIONS

Layas said LIA was interested in attracting more U.S. businesses to Libya and believed the United States could play a major role in the oil producer’s development.

He met a number of U.S. company representatives, as well as the Export-Import Bank during a recent visit to Washington, the cable said.

“Some of the advantages that Layas saw the U.S. having over European competitors for contracts in Libya are the weakness of the dollar compared to the euro, as well as U.S. access to more advanced technology,” it said.

Layas said the LIA was entangled in a legal disagreement with Lehman Brothers “due to a major investment that was ‘mismanaged’”.

He also denied LIA had investments in schemes run by jailed financier Allen Stanford and fraudster Bernard Madoff.

“Stanford had approached the LIA in the middle of his crisis, offering a 7-8 percent share in his investment scheme, but Layas had refused. Layas also mentioned having been previously approached by Bernard Madoff about an investment opportunity, ‘but we did not accept’,” the cable reads.

LIA contributes to a strong balance sheet of Libya, which has net foreign assets at the central bank and the sovereign wealth fund, totalling $152 billion at the end of 2010, almost 160 percent of gross domestic product.