The easing of the credit crisis is giving way for a new generation of sovereign wealth funds.
Japan, Taiwan, Thailand, Bolivia, Nigeria, Canada are just some of the places where a public debate has begun on establishing some form of sovereign wealth fund. And even Scotland is now looking at establishing such a fund to manage oil wealth.
China is also close to launching an agency to restructure and consolidate state-owned enterprises — dubbed by Chinese media as CIC 2.0 in reference to the country’s $200 bln SWF China Investment Corp.
Ashby Monk, expert on SWFs and research fellow at Oxford University, says the crisis may have highlighted the importance of having SWFs and having extra cash to deal with the emergency.
“There is this appetite for governments to set up new SWFs. Certain countries have taken considerable utility from having SWFs and a pool of cash during the crisis,” he says.
“Coming out of this crisis, we are going to see SWFs increase in the same way central bank reserves increased coming out of the 1997 crisis. All these new funds may be the conduits for a real dramatic ramp-up of sovereign wealth funds.”
And the projected growth of the SWF industry is eyebrow raising. The industry is set to double its size to $7 trillion in the next 10 years, according to Deutsche Bank estimates. And there’s no doubt that SWF2.0 will help the growth.