The implications of sovereign wealth fund investment on capital markets: A bottom-up view

• Main Author: FERNANDEZ, David
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2011
• Subjects: Sovereign wealth funds; government entities; investments; Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6571; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7570/viewcontent/Implications_of_Sovereign_Wealth_Fund_Investment_2011_av.pdf
• Institution: Singapore Management University

The buzz around sovereign wealth funds has been turned down a notch, but they remain a hot topic. The accusations of sovereign wealth funds having hidden agendas remain, but with the very public losses suffered by some during the recent financial turmoil, such talk has even less credibility. And given that most of those losses were from investments in US, UK, and European financial institutions, hope that sovereign wealth funds would be the saviors of Wall Street has also faded. At its base, four trends continue to keep sovereign wealth funds in focus. First, there is the phenomenal rise of foreign reserves, chiefly among oil-exporting countries as well as some of the current account surplus countries in Asia. Second, there is the relatively recent establishment of large sovereign wealth funds in geopolitically important countries like China and Russia. Third, there are some high-profile investments by foreign government entities in companies in the United States and Europe that are viewed to be of strategic or even national security importance. Lastly, there are the multi-billion dollar investments in some of the world’s leading financial institutions followed by subsequent losses and partial divestment.