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January 14, 2009

Whither Sovereign Wealth Funds?

They have gone from being feared to (almost) felt sorry for in a very quick span. Now, Outlook Business has an article examining how SWFs are likely to behave going forward.



Even as the US, Europe and many other parts of the world stare at a recession, many SWFs may alter their very nature from being externally focussed investment engines to becoming resource providers for internal growth. They also face the prospect of a significant depletion in resources as their domestic economies slow down.

...It is too early to deliver a verdict on whether the November 2007 charge of SWFs into the global financial arena was just a solitary event or a sign of things to come. Developed markets such as the US and Western Europe would benefit from their infusions, despite widespread nationalistic fervour against them in those economies. But the greater benefit would be to the economies that sponsor such SWFs.

This is perhaps best illustrated by the October 2008 $12.3 billion joint investment by Qatar Holding and Sheikh Mansour Zayed Al Nahyan, a member of the royal family of Abu Dhabi, in UK’s Barclays. "As Dubai, Doha and Abu Dhabi are positioning themselves as global financial centers, it is beneficial to have close ties with a Merrill Lynch or Citigroup or Barclays," says Griffin of BGR Capital & Trade.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in