15.06.2015 - Risks of Sovereign Wealth Funds
Foreign currency earnings began to flow into the region and - to mop up this flood of capital - governments set up sovereign wealth funds, or SWFs. These funds were, in principle, intended to act as banks of last resort for oil producers in the region by investing petrodollars overseas during periods of high prices. Were revenue from oil sales to decline, then these investments could be sold to provide hard currency at short notice to support economic growth. In theory, these SWFs were glorified pension funds, but in practice they provided the rulers of these countries with an insurance policy against political risk, both at home and abroad. However, the problem has become that the SWF system, which over the years has provided bankers in the City with a healthy stream of fees for managing the vast pools of money, has historically proved vulnerable to abuse...............................................Full Article: Source
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