Amid the Eurozone debt crisis and a global liquidity crunch, sovereign wealth funds (SWFs) have emerged as vital forefront players in the international financial market. With squeezed funding options, investors the world over are keen to tap into the liquid power of SWFs.
According to the SWF Institute, total SWF assets rose 9.6 per cent year-on-year in 2011, from $4.4 trillion in December 2010 to $4.8 trillion in December 2011, while the total global SWF pile is expected to swell to $30 trillion within the next 20 years.
Fabio Scacciavillani, chief economist at Oman Investment Fund, the Sultanate’s SWF, told Gulf Business: “Before the great crisis, SWFs used to stir a bout of economic patriotism, particularly when they acquired large stakes in banks or corporations that governments deemed “strategic”. Today these hostile reactions are a distant memory.”
“SWFs are increasingly filling a void in the financial markets and are providing capital to very important parts of the economy where much growth will come over the next 10 to 20 years, such as infrastructure,” added Scacciavillani, former DIFC economist and author of The New Economics Of Sovereign Wealth Funds.
In a tectonic shift, reflective of wider global economic and political dynamics, emerging markets hold the bulk of SWF funds.
“Emerging economies hold an impressive 81 per cent of government FX reserves, reflecting two decades of soaring current account surpluses and strong capital inflows. This wealth is now increasingly being deployed across the world through SWFs,” said Scacciavillani.