Up until three years ago, they were widely demonised as a possible threat to western security. Then they became saviours of first resort to the world’s ailing banks. Today many of them are chastened but on the mend.
EDITOR’S CHOICE
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Seoul sovereign fund eyes private equity alternatives - Apr-04
Quiet SWFs no good for companies - Apr-04
Norway to curb risk to SWF - Mar-28
Sovereign wealth funds courted in debt sales - Mar-24
Sovereign wealth funds – managers of an estimated $3,000bn-$4,000bn of government-owned investments – have not had a uniformly good crisis. “In 2007 and 2008, [they] proved to be neither an unqualified threat nor an unqualified salvation for anyone involved,” says Edwin Truman of the Washington-based Peterson Institute for International Economics, author of a new book on the funds.
While the most heavily publicised hits are the result of ill-timed investments in such financial giants as Citigroup, Merrill Lynch, Morgan Stanley, Blackstone Group and Barclays, more lasting damage may come from the hijacking of the funds by their own governments. The SWFs of Kuwait, Qatar, Russia, China, Kazakhstan and Ireland have together put more than $100bn into propping up troubled domestic banks and collapsing markets. Further raids on national nest eggs cannot be ruled out.
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