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The Rise of Sovereign Wealth Funds

Wharton management professor Mauro F. Guillén, with the help of graduate students, and and sponsored by the Wharton Leadership Center and the Joseph H. Lauder Institute of Management & International Studies, has published a report on the rise of sovereign wealth funds.  The report, "The Brave New World of Sovereign Wealth Funds," provides a fascinating look into these unique investment funds that are supported by the government of a country and funded by budget surpluses of that country.  According to Guillén, sovereign wealth funds are big players in the global investment markets, with assets of over $5 Trillion.  But, says Guillén, these funds are not as opaque and mysterious as they are perceived, nor do they always invest strategically in assets around the world for political purposes.  Fears of the size of these funds may be well founded, says the report, but one of the real risks is the "race to the bottom" of nations and companies seeking to attract investments from these funds.  The paper discusses many of the factors that influence a sovereign wealth fund's desire to be in one country over another, as well as ways in which nations controlling sovereign wealth funds can use them to implement countercyclical fiscal government policy, retire or reduce sovereign debt, or spur growth in developing or underserved area within their borders.

The report offers a very accessible and interesting look at these unique and fascinating government controlled investment vehicles.

The full text of "The Brave New World of Sovereign Wealth Funds" is available at:  http://knowledge.wharton.upenn.edu/papers/download/052810_Lauder_Sovereign_Wealth_Fund_report_2010.pdf