An analysis of sovereign wealth funds' recent venture in developed capital markets

In 2007 and 2008, Sovereign Wealth Funds (SWFs), mostly from Asia and the Middle East, invested billions of dollars in the stocks of major US financial institutions, but prior to these investments, SWFs were relatively unknown in the US. Following major investments by SWFs in the US stock market, both investors and regulators are taking a closer look at them. The cause for concern is that many SWFs disclose very little about their corporate governance, organization structure, investment objectives, and short- and long-term targets, among other issues. These concerns led to fears by some that foreign governments might be using SWFs to acquire strategic assets in the U.S. for geopolitical gains. In this paper, we look at SWFs’ investment objectives, the benefits they bring to target firms, the rising public concern in the U.S. about SWFs, the governance structure of SWFs, their revenue sources and investment preferences, the performance of their U.S. investments, and their regulatory supervision.