Sovereign wealth funds: stumbling blocks or stepping stones to financial globalization?

Joshua Aizenman and Reuven Glick

FRBSF Economic Letter, 2007, issue dec14

Abstract: Sovereign wealth funds (SWFs) are saving funds controlled by sovereign governments that hold and manage foreign assets. Private analysts put current sovereign wealth fund assets in the range of $1.5 to 2.5 trillion. This amount is projected to grow sevenfold to $15 trillion in the next ten years, an amount larger than the current global stock of foreign reserves of about $5 trillion (Jen 2007). While not a new phenomenon, the recent activities and projected growth of SWFs have stirred debate about the extent to which their size may allow them to destabilize financial markets and their policies may be driven by political, rather than economic and financial, considerations. ; This Economic Letter gives an overview of the debate about the expanding role of SWFs in international financial markets. We explain the forces leading to their growth and the challenges they pose for financial globalization. While there is no quick fix to these challenges, encouraging SWFs to invest in well-diversified equity indexes in individual countries, such as the S&P 500 in the United States, may transform the role of these funds from stumbling blocks to stepping stones towards financial globalization.

Keywords: Financial markets; International finance (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.frbsf.org/publications/economics/letter/2007/el2007-38.html (text/html)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.frbsf.org/publications/economics/letter/2007/el2007-38.html [301 Moved Permanently]--> https://www.frbsf.org/publications/economics/letter/2007/el2007-38.html)
http://www.frbsf.org/publications/economics/letter/2007/el2007-38.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfel:y:2007:i:dec14:n:2007-38

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in FRBSF Economic Letter from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().