Sovereign Wealth Funds

There’s a lot in the news the last couple of weeks about the investments Sovereign Wealth Funds have been making in to American companies. They’re a incredibly fascinating component to the new global flow of money, especially now as they are taking large stakes in America’s capital starved banks. Let’s break down who has done what in the last few months (from NYT):

  • Merrill Lynch: $4.4 billion from Temasek Holdings (Singapore, owner of Singapore Airlines, SingTel, half of Virgin Airlines, etc)
  • Merrill Lynch: $6.6 billion from Korean Investment Corp and Kuwait Investment Authority (the second cash infusion in two months, done as convertible stock)
  • Morgan Stanley: $5.5 billion from China Investment Corporation (formed to manage a fraction of China’s $1+ trillion American dollars)
  • Citigroup: $7.5 billion for 4.9% from Abu Dhabi Investment Authority (wasn’t really in the news until this last year, but has over $1 trillion in management)
  • Citigroup: $12.5 billion from a group including Government of Singapore Investment Corporation (the other major SWF in Singapore, larger in capital than Temasek)

Foreign governments and banks have been the ones basically running the American economy for the last four or five years by buying American debt; it’s only natural they’d want a bigger piece of the pie. Most of the investments have come as non-voting shares, in what would seem largly to avoid the fate of Cnooc attempted buyout of Unocal or Dubai Ports World attempted purchace of P&O. It’ll make an interesting twist if they don’t see returns on their investments and if exercise their influence in American banking.