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The
record high oil prices of $96 a barrel that generated around
$3,000 bn (and counting) is estimated to have reached the
hands of Sovereign Wealth Funds (SWFs) by the end of 2007.
SWFs are the latest buzzword in the global financial markets.
What has brought SWF to the limelight? It was the much
exposed move by government-owned Borse Dubai's acquisition
of 19.9% stake in the Nasdaq stock market. They also acquired
stakes in the London Stock Exchange and China's State Foreign
Exchange Investment Corporation. Wall Street analysts say
the growing prominence of these funds portends a fundamental
shift in financing power away from Western nations. Over the
past few months, funds from China, Singapore and the Middle
East have splashed out more than $30 bn to buy stakes in some
of the best-known names in the industry. Companies like Citigroup,
Morgan Stanley, UBS and Bear Stearns have all taken the foreign
shilling. Even Merrill Lynch is seeking funds from
Singapore's Temasek.
An
SWF is a government investment vehicle that manages and invests
the national savings of different countries and manages assets
twice as much as the global hedge funds. SWFs are established
by the export-heavy countries, like the UAE, Singapore, Norway
and China, in order to get better returns on their investments.
Until now, these funds have been largely parked in passive
government bonds, mainly US treasury bonds. There is an allegedly
new twist in the scale of SWF business today; the funds are
moving to riskier assets such as equities and corporate bonds
in anticipation of higher returns. |
