Fletcher in the News

CEME Senior Fellow Patrick Schena on the Return of Sovereign Wealth Funds

The Deal Magazine

Sovereign wealth funds return

In short order, the image of sovereign wealth funds went from global predator to high-profile patsy. Several of these huge, government-created investment pools bet billions of dollars on big-name financial institutions and other marquee concerns and notched equally large losses in the aftermath of the 2008 crisis. Then news pretty much stopped.

A new study by London-based research group Preqin Ltd. shows that the total value of sovereign wealth funds at the end of March topped $4.62 trillion, a more than 50% increase over 2008. That jump comes after a fairly static two years. At this time last year, sovereign wealth funds totaled a bit less than $4 trillion, Preqin estimates.

The study serves as a stark reminder that sovereign wealth funds remain a powerful force globally. That potency, many analysts maintain, will only increase over time.

"Their impact on global capital markets, their impact on direct investment, will expand and continue to grow," says Patrick Schena, a senior fellow at the Center for Emerging Market Enterprises at Tufts University's Fletcher School. The center two years ago created the Sovereign Wealth Fund Initiative.

Mind you, the gains, while impressive, are nowhere near some of the pronouncements made before the global crisis. In early 2008, a few seers predicted sovereign wealth funds would reach $12 trillion by 2015 and would dominate mega-investments.

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