The New Economics of Sovereign Wealth Funds

Introduction

Sovereign Wealth Funds (SWFs) have become one of the most closely scrutinized phenomena in financial markets over the past few years. Despite (or, some would say, due to) their tendency to maintain a low profile and discretion in their activities, they have been the object of political fears, virulent controversy, media indignation and public scourge. Nevertheless, they have been discreetly courted by capital-starved corporates and banks, governments seeking funding and finance professionals eager to manage their assets.

This ambivalent attitude has pervaded the policy debate and the public's attitude since the middle of the last decade when SWFs made waves in the exclusive world of international high finance.

The SWF phenomenon can be analysed at various degrees of granularity. Most books devoted to SWFs have focused on the undue influence they might exert through the acquisition of ‘strategic’ assets and on the political backlash that has resulted (for example, Quadrio Curzio and Miceli, 2010; Subacchi, 2008; Park, 2011). Others have analysed the implications for the balance of economic power, the links to financial protectionism, the threats to national security, the impact on financial markets. Lately an extensive literature has been devoted to the framework proposed by the international community to regulate their activity (among others, Das et al, 2010; IMF, 2007; Park, 2011; Truman, 2010).

This book will focus on the big picture which has been lost in the noise ...