Tags: Sovereign | Wealth | Funds | Tighten | Investment | Spigot

Sovereign Wealth Funds Tighten Investment Spigot

Monday, 17 May 2010 02:50 PM

Sovereign wealth funds, government-owned investment vehicles, made $69 billion in equity investments in 2009, a 37% drop from 2008's $109 billion, according to research groups Monitor Group and Fondazione Eni Enrio Mattei in Italy.

Sovereign-wealth funds are normally funded by natural-resources revenues or, in Asia, export revenue, and were hurt by the recent global recession.

The fund that spent the most last year was Qatar Investment Authority, spending $32 billion, according to the Wall Street Journal.

Investments include $13.3 billion in a Qatari railroad, a $10 billion stake in the Porsche automobile company and $4.7 billion investment in Volkswagen.

China Investment Corp. also invested heavily in Indonesia, Canada and elsewhere.

Many funds faced political resistance prior to the economic crisis, with the U.S. and Europe fearing sovereign-wealth funds mainly from Russia, China and the Middle East would make investments for political reasons and less for commercial ones.

Many emerging-market economies are weathering the global financial crisis better than developed countries, which have borrowed heavily and are facing tough times managing deficits.

The International Monetary Fund, a multilateral lending institution, has said that debt financing needs for many industrialized economies will surpass 20 percent of their total economic output in 2010.

That could cut into future growth rates as the crisis ebbs, although the IMF feels advanced economies will find the political will to cut spending and correct their ailing economies.

“I am convinced that there is much that countries can do now to strengthen confidence in long-term fiscal sustainability without weakening growth prospects,” says IMF Managing Director Dominique Strauss-Kahn, according to Reuters.

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Sovereign wealth funds, government-owned investment vehicles, made $69 billion in equity investments in 2009, a 37% drop from 2008's $109 billion, according to research groups Monitor Group and Fondazione Eni Enrio Mattei in Italy. Sovereign-wealth funds are normally...
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2010-50-17
Monday, 17 May 2010 02:50 PM
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