Sovereign Wealth Funds: A Critical Analysis

18 Pages Posted: 24 Sep 2009

See all articles by Bryan J. Balin

Bryan J. Balin

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS)

Date Written: September 23, 2009

Abstract

In recent months, sovereign wealth funds have received much attention and criticism on the world stage. This paper analyzes these funds from a multidimensional perspective, showing their relative size, origins, history, strategies, and what regulatory oversight they have. Next, it examines why countries create sovereign wealth funds, and the criticisms of these funds. Thirdly, it projects the likely behavior of sovereign funds in the near term, explaining that they will create more liquidity and lower costs of capital in emerging equity markets and raise the demand for the services of existing investment managers. These funds will not, however, contribute to higher interest rates in U.S. treasuries or cause direct confrontations between the U.S., the UAE, Russia, and China over fund holdings. These funds may, on the other hand, increase the volatility of developed and emerging markets and create greater demand for openness to foreign direct investment among sovereign wealth fund-holding countries.

Keywords: sovereign wealth fund, international capital movement, Abu Dhabi Investment Authority, China Investment Fund, capital flows, Russian Stabilization Fund, open investment.

JEL Classification: N10, N20, E60, E69, F20, F21, F31, F33, F36, G18, G28, N15

Suggested Citation

Balin, Bryan J., Sovereign Wealth Funds: A Critical Analysis (September 23, 2009). Available at SSRN: https://ssrn.com/abstract=1477725 or http://dx.doi.org/10.2139/ssrn.1477725

Bryan J. Balin (Contact Author)

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

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