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Anorak | Sovereign Wealth Funds

Sovereign Wealth Funds

by | 24th, December 2007

SOVEREIGN Wealth Funds – “An issue rumbling away in the business sections for the past few months, and likely to rumble on in the New Year, are the activities of what are called “sovereign wealth funds,” enormous funds, usually accumulated from government oil revenues and run by countries such as Norway.”

Big money. Foreign money.

“They are now major buyers of assets such as chunks of shares of banks like Citi, the US bank that has taken massive write-downs connected to the US sub-prime mortgage crisis.

“The question that comes up, especially when these funds are run by Middle Eastern governments or the Chinese, is whether their control of large parts of western firms poses some sort of ‘problem’.

“At this stage, I do not see it being a problem. As Sylvia Pfeiffer points out, these funds ultimately want what any intelligent investor wants: maximumum possible returns. I suppose that conspiracy theorists might wonder whether the Chinese, say, will deliberately run their acquisitions into the ground as part of some grand dastardly Blofeld-like plan to take over the world, but this strikes me as a bit unlikely. Perhaps more significant are issues such as protection of intellectual property rights and whether the companies that get taken over are as open about their accounts and profits as before. But again, it strikes me that as long as these new funds do not breach any regular laws against fraud or force, I do not see their activities as a problem.

“The truth is, emerging economies in Asia, coupled with the petro-dollar wealth of the MidEast, parts of Asia, Russia and even Africa, is giving these funds a degree of market muscle that has taken some investment observers by surprise, but it should not do so. We are living through a major period of change in the economic clout of non-western states.

We might as well learn to profit from it.”

So says Samizdata. We say if the foreign power is looking to make money, then why not use a SWF. Or why not just give it back to people in tax breaks and let them decide how the money should be spent?



Posted: 24th, December 2007 | In: Reviews Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink