Despising and Embracing Sovereign Wealth

cityThe sheer size and reach of sovereign wealth funds steered government policymakers’ attention. In 2007, politicians asserted, “how can these governments buy up our prized national assets?”

In 2012, the message was “will they buy our bonds now?”

The protectionist attitude towards sovereign wealth funds has changed dramatically and it wasn’t because of the Santiago Principles or a change of heart. It was a necessity created by the financial crisis for Western nations to maintain their welfare state and standards of living. Spanish and Italian government officials have courted Asian sovereign wealth funds and central banks. British government officials have courted their Gulf partners. Sovereign wealth funds have been courted to purchase European sovereign debt, but they prefer companies, properties, and real assets.

The rapid growth of state-owned accumulated assets versus pension asset growth has spurred interest among fund managers and financial institutions. The finance media followed the bandwagon of the sovereign wealth moniker just as when private equity and hedge fund were trending.

April 2012, sovereign wealth funds are basically at US$ 5 trillion, Occidental governments have taken notice of this. In 2007, sovereign asset growth was projected by some investment banks to double or at least triple, but this did not come true because of the devastating effects of the financial crisis of 2008.

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