Sovereign Wealth Funds

Paper Summary:

This paper discusses sovereign wealth funds (SWF) and explains that their purpose is to manage government wealth and help to limit states' exposure to risks of scarcity. The paper specifically addresses the concerns about SWF's impact on financial markets and on national security concerns about how they are invested. In particular, the paper focuses on the threat to the United States posed by foreign countries that use SWF's to invest in American companies, primarily state-run businesses, and thus influence the markets when they buy and sell. The paper shows how with so much at stake, there is a need for mutual trust for both investors and host countries so that each continues to benefit from SWF's enormous potential by minimizing risks along the way.

From the Paper:

"SWF's originally consisted of currency reserves, generally against a limited natural resource. In America, these reserves had been held by the gold standard in previous years but as the United States decided to abandon pegging the dollar to gold the dollar maintained it's stability as a fiat currency. Moreover, as time moved forward banks continued to hold multiple currencies, including the dollar, invested in non tradition assets such as equity funds as set by public authorities. These funds have been referred to as Sovereign Wealth Funds since 2005 despite being around since the mid 90's (sovereign, n.d.)"

Sample of Sources Used:

• Abu Dhabi Investment Authority (n.d.). [Electronic version]. Wikipedia. Retrieved March 8, 2008, from http://en.wikipedia.org/wiki/Abu_Dhabi_Investment_Authority
• Asset-Backed Insecurity (2008, January 17). Sovereign Wealth Funds [Electronic version]. The Economist. Retrieved March 8, 2008, from http://www.economist.com/finance/displaystory.cfm?story_id=10533428
• Gerwin, E.F., & Kiern, L. (2006). Exon-Florio Amendment Now U.S. Law [Electronic version]. The Deal. Retrieved March 8, 2008, from http://www.winston.com/siteFiles/publications/Gerwin-KiernSept.2007Dealarticle.pdf
• IMF Board Endorses Work Agenda on Sovereign Funds. (2008, March 21). IMF Survey Magazine: In the News. [Electronic version]. International Monetary Fund. Retrieved March 21, 2008, from http://www.imf.org/external/pubs/ft/survey/so/2008/NEW032108A.htm
• Lee, H.T. (2008, January 18). Sovereign Wealth Funds [Electronic version]. Counsel of Foreign Relations. Retrieved March 8, 2008, from http://www.cfr.org/publication/15251/

More papers on Sovereign Wealth Funds:

• Analytical Essay # 142693 : "Regulatory Review and State Sovereign Immunity"
• Essay # 70923 : "Closed-End Mutual Funds"
• Analytical Essay # 149251 : "Wealth in America"

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