Executive Decision - March/April 2008 - (Page 27)

LEADERSHIP Management Technology Life At the top Strategies economic profile Finance/legal from Sovereign Wealth Funds Truman explains that governments, which are investing in sovereign wealth funds, find they have increasing amounts of money in their portfolios and need to look more broadly for places to put it. Examples are the oil rich governments in the Middle East. China, Russia and other states are also active players in sovereign wealth funds. “Sovereign wealth funds are just an evolution of how other countries play in capital markets,” explains Richard Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics. “They’ve been in the market for a long time.” Previously, governments may have gone to a third party to help find investments. Foreign governments also often invested in United States Treasuries. More recently, however, they have been looking at stocks and real estate. “Now, they have their own name on the door,” Whalen says. “They raised their profile.” There are many benefits from getting investments from sovereign wealth funds. They tend not to get involved in corporate governance, often shying away from serving on boards of directors. They also tend to avoid political controversies. In many cases, money invested by foreign governments is already invested in the United States but is being moved into other investments by the sovereign wealth funds. But they have generated some controversy, too. Most prominent in the United States related to DP World. At issue was the sale of port management businesses in six major United States seaports to a government-owned company based in the United Arab Emirates. A noisy debate arose whether the sale would jeopardize port security. Yielding to pressure, DP World eventually withdrew its plans for the American ports. In Europe, press reports note how French President Nicolas Sarkozy and German Chancellor Angela Merkel have expressed concern over sovereign wealth funds. Critics say these funds are secretive and may have political goals—not just the goal of getting good returns on investment. Truman says that critics of these funds believe that they will manipulate their investments to gain political or economic advantages. In response, there is the potential for tougher scrutiny of sovereign wealth funds in the United States. For instance, the Committee for Foreign Investment in the United States (CFIUS) may see a strengthened regulatory role after the Investment and National Security Act of 2007 was signed into law. Democratic candidates for president have mentioned that greater attention needs to be paid to sovereign wealth funds. Most of the concerns have focused on the need for more transparency, and some funds, such as Norway’s Government Pension Fund–Global and Singapore’s “Now, they have their own name on the door, they raised their profile.” EXECUTIVE DECISION I March-April 2008 27

Table of Contents Feed for the Digital Edition of Executive Decision - March/April 2008

Executive Decision - March/April 2008 Contents Index of Advertisers Contributing Editors From the Editor's Desk Publisher's Note You Be the Judge - Unionization Thought Leader - Pitney Bowes Management - Flying High for Long-Term Results Strategies - Sovereign Wealth Funds Cover Story - In Whom Do We Trust? The Movement for Greater Accountability & Disclosure Finance/Legal - The New Boycott Model Green At Work - Transforming for Sustainability Technology - Embracing Risk Leadership - Executive Reputation Management The Global Village - China Moves to Curb Prices Economic Profile - California Gold Rush Transformations - I Can See Clearly Now, The Brain Is Gone Marketing - Effectively Using Market Research The Bottom Line - Brands: A Shrinking Advantage or Shifting Advantage? Pulse - Pandemic: Not If But When SPECIAL SECTION - Living On the Green: Luxury Golf Destinations

Executive Decision - March/April 2008

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