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December 2007

Sovereign wealth funds: The new rulers of finance

State-owned, cash-rich and increasingly influential, sovereign wealth funds have emerged as the most controversial players in the financial markets. All the constituents – banks, private equity, corporates, hedge funds – want a slice of their action. Just how powerful will the funds become? Sudip Roy reports.




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SOVEREIGN WEALTH FUNDS are reshaping the financial markets. Although the estimated $2 trillion of assets that they manage is small beer compared with the $53 trillion that mature-market institutional investors oversee, the speed at which the state-owned funds are accumulating assets is astonishing. Powered by high commodity prices and surging foreign exchange reserves, they will grow by $1.2 trillion a year to reach $7.9 trillion by 2011, reckons Merrill Lynch.

Analysts might dispute the precision of these figures but few dispute that sovereign wealth funds are becoming a force in the financial markets. On an individual basis, the six biggest funds are quickly catching up in size with the leading global portfolio managers, such as Barclays Global Investors, State Street Global Advisors and Fidelity. Already the...


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