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Alright, be honest. When you hear the words "sovereign wealth funds", don't you also hear, ever so faintly in the background ... that evil empire theme from "Star Wars?" You know, in the scene where we see the Death Star and the Emperor sits plotting, his face covered in hooded darkness. Perhaps I exaggerate... but if you listen to some of the scaremongers out there, SWFs are out to rule the world.
Sure they've gained world-wide exposure (or notoriety) these past 12 months, most notably by investing in Wall Street firms -- think China Investment Corp [CIM
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] and Morgan Stanley [MS
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], Singapore's Temasek Holdings and Merrill Lynch [MER
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], and the Abu Dhabi Investment Authority's deal with Citigroup [GE
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].
Morgan Stanley estimated last year that by 2015, SWFs could grow to $12 trillion dollars, surpassing the size of the world's total official reserves in five years. Oil exporters (read: Middle East) and Asian non-oil exporters (that would be about most every economy here) make up the bulk of SWFs. In other words, they're coming from emerging economies, not the world's established economic powers.
And that's probably the biggest reason why there is suspicion about their motives and why critics warn SWFs have the potential to tilt the playing field.
Later this month, the IMF will unveil a voluntary code of conduct agreed to by the world's main sovereign wealth players. A gentleman's code of honor or protectionist safeguards set by developed economies? The world is waiting (cue ominous soundtrack please)...
What are your thoughts on the rise of Sovereign Wealth Funds and the roles they play in shifting the global balance of power?
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