Sovereign wealth funds (SWFs) have dominated the headlines of recent weeks after buying stakes in US investment banks hit by write-downs of billions of dollars. The $7.5bn (£3.7bn) equity investment by Abu Dhabi Investment Authority (ADIA) in Citi is a notable example. Two weeks ago the Government of Singapore Investment Corporation broadened its reach by investing A1bn (£788m) in a company controlled by Italy’s Benetton family.
Many of the state-owned SWFs, such as the Kuwait Investment Authority, have in fact been in existence for half a century or more. However, the spotlight has only really been focused on these funds in the past two or three years. This is primarily due to the abundance of super liquidity arising from the spike in the price of commodities, most notably oil (up from $10 (£5) a barrel in 1990 to $100 (£50) or so now) but also the steady decline in the dollar, which has had a marked impact on the fortunes of China and other east Asian countries.
