Why does their country not start one? Pension schemes are shot to pieces in most developed countries because they are unfunded. Governments are also experiencing budget difficulties, so ageing populations can expect little pay out in the years ahead.
How different the picture would look if money that has been spent on unnecessary wars and social failure had instead been saved for the general good of the country’s citizens. From a markets’ perspective the interesting feature about sovereign wealth funds is that the newer models are taking on more leverage and making more strategic purchases. Dubai Holding and Dubai World and their subsidiaries tend to be more aggressive than the longer established Kuwait Investment Authority and Abu Dhabi Investment Authority.
A recent Citi research report says: “They are actively involved as investors in leveraged buy-outs and co-investors in private equity investments. In many countries [the more proactive sovereign wealth funds] have served the dual objectives of wealth creation and the support of the country’s industrial policy.” Take it as read that there will be more of them and that they are a great source of investment banking business.
