Thursday, December 13, 2007

Rich Countries Funding Big Banks

by Robert Lenzer from Forbes (US: New York)

This global flow of funds is growing by $1 trillion a year, thanks in part to $90 a barrel oil and Chinese exports. Such a radical reversal in the flow of funds is bound to be controversial. When their assets are added to those of central banks stuffed with petrodollars, these new investment phenomena are truly the fastest-growing institutionalized wealth in the world ... But, while they may be coming under more intense scrutiny, sovereign wealth funds (SWFs) should not be seen as a nefarious influence in global markets. They run the gamut from government investment funds, state-owned companies and central banks to wealthy individuals like members of the Saudi royal family and even private companies owned by Arab potentates. One reason they are controversial, as Diana Farrell of McKinsey, the consulting giant, pointed out the other day at the Council on Foreign Relations, is they are "a challenge to the Anglo-Saxon model." What this means is that these investors are not as transparent as giant private equity firms, public pension funds or mutual funds around the globe. The Abu Dhabi Investment Authority, for example, does not reveal the holdings in its portfolio to the public. I challenge you to understand what the Saudi central bank owns. All the more reason why SWFs must act responsibly.

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