Sovereign Wealth Funds (SWFs)

The International Monetary Fund (IMF) estimated in September 2007 that sovereign wealth funds, or SWFs, control as much as $3 trillion, and that this tally could jump to $12 trillion by 2012. … As of early 2008, the total assets of SWFs, estimated at nearly $3 trillion, surpass the $1.5 trillion managed by hedge funds worldwide—but are dwarfed by the $53 trillion managed by institutional investors like pension funds and endowments.

The above is from the background on sovereign wealth funds in the Center for Financial Research (CFR). SWFs are public investment agencies that manage part of the foreign assets held by national states. Examples of large SWFs are the Abu Dhabi Investment Council that has an estimated USD 400-800 BN in assets, the Norway Government Pension Fund with an estimated USD 373 BN in assets, and the China Investment Corporation with ~USD 200 BN in assets [Ref]. SWFs have been credited with improving market liquidity in the US financial sector having pumped in USD 69BN dollars over the past 7 months. At the same time, the large stakes acquired by these government-owned funds in corporations and the lack of transparency of SWFs in disclosing their holdings has been a cause of concern for governments in recipient countries. Some of the SWFs appear to be taking steps towards greater transparency. Other concerns remain. As the CFR backgrounder puts it:

…what if Middle Eastern or East Asian SWFs banded together to oust the CEO of a U.S. corporation? In corporate governance terms, this would be seen as positive shareholder activism, but when governments are involved, experts are left to guess at whether such clout would be used for financial gain or for political purposes.