Sovereign wealth funds--a measured assessment

Abstract

Sovereign wealth funds (SWFs) have received extensive publicity in recent months. The prospect of significant investments by SWFs potentially giving foreign countries control over important parts of an investee country's economy has emerged as a political issue, stimulating protectionist sentiment. For example, during the Democratic Presidential primary debates in the USA, concern was expressed about SWFs, and there was a call for more control over their activities.1 In the EU as well, political figures such as Nicolas Sarkozy in France2 and Angela Merkel in Germany3 have raised alarms over the threat posed by SWF investments.4 While SWFs do deserve attention, much of the public discussion has overemphasized the threat of foreign investment, without differentiating between the varying investment objectives of governmental entities, and without acknowledging that existing regulations in many countries already address the risk posed by direct foreign investment. This article will argue as...