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Das, Dilip K. --- "Sovereign-wealth Funds – A Paradigm Shift in Capital Flows in the Global Economy" [2012] ELECD 238; in Athanassiou, Phoebus (ed), "Research Handbook on Hedge Funds, Private Equity and Alternative Investments" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on Hedge Funds, Private Equity and Alternative Investments

Editor(s): Athanassiou, Phoebus

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849802789

Section: Chapter 3

Section Title: Sovereign-wealth Funds – A Paradigm Shift in Capital Flows in the Global Economy

Author(s): Das, Dilip K.

Number of pages: 24

Extract:

3. Sovereign-wealth funds ­ a paradigm
shift in capital flows in the global
economy
Dilip K. Das* 7




INTRODUCTION

Financial globalization has gained momentum in recent years. Over the
last two decades the rate of increase in global cross-border investment was
twice that of the rate of growth of multilateral trade in goods and services,
which in turn exceeded the rate of global GDP growth (Lane and Milesi-
Ferretti, 2006). State-owned and managed sovereign-wealth funds (SWFs)
have played an increasingly important role in underpinning, sustaining
and expanding financial globalization and in supporting financial diver-
sification. At the same time, they have not escaped criticism over their
activities, nor have they been spared losses on their investments since the
onset of the global financial crisis.
SWFs have grown considerably in significance in the course of the last
few years. The global financial crisis has made of them a more visible
group of investors, while their participation in global financial markets
appeared likely to grow in importance for as long as inflows from trade
surpluses and commodity exports continued (IFS, 2010). At the same
time, given their limited disclosure and lack of transparency, SWFs have
prompted economic nationalists to threaten with a protectionist backlash.
Pre-crisis, threats of financial protectionism had been mounting in propor-
tion to the increase in their global investments. As a result, despite being
significant liquidity-enhancing and financial resource allocation agents,
SWFs had also become the focus of a controversy, with both public and
...