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Sovereign Wealth Funds (SWF)
Sovereign Wealth Funds (SWF)
How big are they? Estimates vary. The 28 nations with Sovereign
Wealth Funds (SWFs) have, in total, assets of $2.1 trillion, figures
Edwin Truman, an expert at the Peterson Institute for International
Economics in Washington.
SWF assets could be $3 trillion now and $10 trillion by 2012, reckons
Simon Johnson, IMF research director.
Warren Buffett, the famed billionaire investor, has worried that as long
as the US has major foreign trade deficits (some $700 billion a year), it
has to "give away a little part of the country" each year. The US could
end up with a "sharecropper economy," where Americans largely work
for foreign-owned firms.
But an 8 percent return is almost twice what most nations get with their
huge stocks of surplus US dollars invested in US Treasury bills. And a
higher return and diversification is what most nations are seeking with
SWFs.
China has $200 billion in an SWF, part of $1.43 trillion in foreign-
exchange reserves, the world's largest. Most is in Treasuries. China's
SWF invested $3 billion last June in Wall Street investment bank
Blackstone Group LP. Its stock promptly sank to $22 from its purchase
price of $31.
Mr. Truman warns that "a lot of countries" with SWFs must agree
before the IMF can institute a "best practices" system. Rogoff says that
some Middle East countries with SWFs may not be keen to meet
"transparency" standards since national elites may be using the funds
to enrich themselves.