The New Economics of Sovereign Wealth Funds

Foreword

This book on Sovereign Wealth Funds (SWFs) is both timely and provocative. It comes at a time when the role and nature of SWFs are developing rapidly. It captures a great deal of the history of that development and makes a number of pertinent observations about SWFs' future.

The book places the development of SWFs in both an economic and political context. In many ways, their development has mirrored the shifting balance in world economic power as China and other countries have emerged as major players.

The authors also address the very fundamental and ongoing questions about how the wealth being built up in SWFs should be used. Central to that consideration is the question of inter-temporal allocation of resources. This issue is not peculiar to SWFs but is one that confronts all governments as a crucial consideration in their decisions on the scope, nature and timing of infrastructure development.

The international political issues relating to SWFs are also discussed. In many ways, these are akin to the issues surrounding direct foreign investment policies in the 1960s, 1970s and 1980s. Then the debate centred on national sovereignty. Today the issues are more pointed, with SWFs being seen by some as foreign government bodies with ownership stakes in other countries' critical institutions.

From my own experience, both in the asset management industry and as the chairman of a public investment corporation, SWFs have played an important role in two other respects.

First, ...