- rise of the Sovereign Wealth Funds (SWF)

Sovereign Wealth Funds (SWF) are assets held by governments another country's currency. A country can create a sovereign fund that runs a current account surplus and accumulates more reserves than it needs for immediate purposes. The table below shows the world’s largest SWF:

Sourced by Morgan Stanley
Country	Name	Assets $’billion	Inception Year
UAE	Abu Dhabi Investment Authority	875.0	1976
Norway	Government Pension Fund	380.0	1996
Singapore	GIC	330.0	1981
Saudi Arabia	Various	300.0	NA
Kuwait	Reserve Fund for Future Generations	250.0	1953
China	China Investment Corp	200.0	2007
Singapore	Temasek Holdings	159.2	1974
Libya	Oil Reserve Fund	50.0	2005
Qatar	Qatar Investment Authority	50.0	2005
Algeria	Fond de Regulation de Recettes	42.6	2000
US	Alaska Permanent Fund Corp	38.0	1976
Brunei	Brunei Investment Authority	30.0	1983
Others		171.4	-
	Total	2,876.2

Currently, sovereign funds make up only 2% of the world’s $165 trillion worth of traded securities. A research firm, Brad Setser and Rachel Ziemba disclosed that sovereign wealth is growing fast. The IMF predicts that sovereign wealth funds will be worth $10 trillion by 2012. These SWF often invest abroad and for long periods in relatively risky assets. They also have a variety of motives. For example, Norway sees its reserves as a pension fund. Russia and Iran have stabilization funds to counter the volatility of energy prices. China and South Korea want returns and possibly assess to markets, ideas and technology.

Whatever their motives, these SWF are bound to influence prices and markets. In the face of the current credit crunch, SWF have become active investors in some of the largest companies in America and Britain. There are growing concerns about the secretive nature of such funds. Very few of them publish information about their assets, liabilities, or investment strategies. Though sovereign wealth funds do not appear to have played a role in the recent turmoil of global markets, experts say they could in the future, in favorable or unfavorable ways - by selling assets abruptly and precipitating a crisis, or by bailing out funds or companies that are in trouble. Some critics see them as the next villains of international finance.

Not surprisingly, there is now a debate about the potential risks and opportunities of sovereign wealth funds, similar to the ongoing debate about hedge funds. As sovereign funds grow in importance, it is in the interest of global financial stability that they be regulated by, for instance developing possible codes of conduct for them, obligating them to disclose their investment methods and requiring them to avoid interfering in a host country's politics, etc.