The Kogod School of Business hosted an international conference last month to discuss sovereign wealth funds (SWFs), investments owned by governments. SWF’s are pools of money derived from a country’s reserves, which are set aside for investment purposes that will benefit the country’s economy and citizens.
The one-day-conference, The Contributions and Impact of Sovereign Wealth Funds, allowed experts to share their views on the shifting global economic climate. The funding for an SWF comes from central bank reserves that accumulate as a result of budget and trade surpluses, and even from revenue generated from the exports of natural resources. The types of acceptable investments included in each SWF vary from country to country; countries with liquidity concerns limit investments to only very liquid public debt instruments.
“Academics must start vital conversations about SWFs,” said Kogod Executive-in-Residence and event organizer Ghiyath Nakshbendi. “Their impact on the global economy cannot be overlooked.”
Nakshbendi didn’t hestitate to mentioned the crucial timing of the conference– as the annual International Monetary Fund and World Bank meetings begin, now is the time to explore pressing business issues, he said.
Some countries have created SWFs to diversify their revenue streams. For example, the United Arab Emirates (UAE) relies on oil exports for its wealth. Therefore, it devotes a portion of its reserves to an SWF that invests in other types of assets that can act as a shield against oil-related risk.
The amount of money in these SWF is substantial. As of May 2007, the UAE’s fund was worth more than $875 billion. The estimated value of all SWFs is pegged at $2.5 trillion.
Speakers at the conference included Carol Bertaut, chief of the Global Financial Flows section in the International Finance Division of the Board of Governors of the Federal Reserve System; Mohammed Jaham Abdulaziz Al Kuwari, ambassador of the State of Qatar; and former U.N. analyst Celeste Lo Turco.