Sovereign Funds Hit Back; on the Defensive: Bader Al-Sa'ad, of Kuwait Investment Authority, Says It Is Unjustified to Fear the Secretive State Wealth Funds
Byline: Sam Fleming
THEY have swept to the rescue of some of the biggest banks in the West,ploughing more than [pounds sterling]30bn into household names such as Merrill Lynch, UBS andCitigroup.
But Sovereign Wealth Funds (SWFs) have received a frosty welcome inSwitzerland, and some may have wished they'd skipped the meetings altogetherand headed for the ski slopes.
These often secretive governmentcontrolled investment vehicles control wellover [pounds sterling]1 trillion of assets, giving them vast financial firepower.
Kuwait and members of the United Arab Emirates have spent decades building uptheir funds thanks to the flow of oil revenues into their coffers.
And China has more recently accumulated [pounds sterling]750bn of foreign exchange reservesthat it wants to deploy abroad.
How these fortunes are used is the subject of intense debate between govern-ment representatives meeting in Davos.
SWFs have proven a godsend to enfeebled Wall Street banks brought low byill-advised investments in subprime mortgages.
In Britain Barclays last year sold a [pounds sterling]1.5bn stake to China Development
Bank during its pursuit of ABN Amro, and Singapore's Temasek is a long-standingshareholder in Standard Chartered. But SWFs are struggling to allay fears theycould be used as political weapons by cynical foreign regimes.
Former US treasury Secretary Larry Summers pointed out that their financialclout could easily be used for nationalistic ends - perhaps by launching aspeculative assault on a foreign currency in the same way that George Sorostorpedoed the pound in 1992.
Other Davos participants worry SWFs could snap up foreign companies in order tosteal their technology and intellectual property.
Russia and China are viewed with particular suspicion given their strainedpolitical relationships with the west.
There is particular concern about SWFs' refusal to be transparent about whatthey invest in, or what their goals are. No one even knows the precise worth offunds like the Abu Dhabi Investment Authority - even though the latter is a nowa major investor in Citigroup. …