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Abstract
Sovereign Wealth Funds (SWFs) have existed since 1953 and are here to stay. Their size and influence is set to grow. Already valued around $2.2 trillion, on current trends they could even reach $13.4 trillion in a decade. These government controlled funds are expected to take bigger financial stakes in equity and bond markets across emerging economies; to feed more money into alternative investments such as hedge funds and private equity; to boost strategic links with countries that have not shared fully in globalisation or which have been shunned by the West; and to take more strategic stakes in sensitive areas within developed countries. This study analyzes SWFs, detailing the largest 22, what drives them and their likely future impact.
Keywords: Sovereign wealth funds, state capitalism, secret funds, government controlled funds
SECTION I: IMPACT AND IMPLICATIONS
Introduction
This study focuses on a major global issue - the rise of sovereign wealth funds (SWFs). We have talked about it in terms of State Capitalism - as it is this, rather than all aspects of SWFs, that is the crux of the issue. State Capitalism is the use of government controlled funds to acquire strategic stakes around the world. The growth of SWFs and the location of the countries from which they originate provides another example of how the balance of economic and financial power is shifting.
SWFs are not new. In fact some of them have a long history, with the first being established as long ago as 1953. Of the twenty two largest SWFs that are examined in this Study, seven were in existence before 1990, six started in the 90s and nine since the millennium. A number of smaller funds have started in recent years and, as existing funds prove successful, this may well encourage other countries to establish their own. Given how long SWFs have been in existence, it is remarkable how focus on them has only recently become a big issue, particularly in policy circles.
The change seems to be occurring on both sides. On the SWF side, the difference is that now the number of countries pursuing such a strategy of having their own fund has soared and the amounts at their disposal are huge. Although many SWFs...