Sovereign Wealth Bankers

Sovereign wealth funds are over US$ 5 trillion in assets. With government bonds in Western countries giving little yield, public pension funds and sovereign funds have an opportunity to become lenders and earn a higher yield. Sovereign debt poses risks as well, real capital can be diminished. As Western banks are hit with a plethora of regulations, banks are not lending as much, especially to projects and certain lines of business. Financial institutions are concerned about illiquid investments; Basel III makes it more challenging. Banks are cautious about adding illiquid liabilities on their balance sheets.

Sovereign wealth funds have the chance of becoming the new bankers for the next decade. Many are creating offshore entities to begin lending operations.

There is tremendous demand for higher yield bonds, without taking on equity risk.

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