Sunday, August 16, 2009

SWF update

Only a year ago, Sovereign Wealth Funds (SWFs) were the talk of the financial markets, provoking both admiration and raising strategic concerns at their remarkable growth. Then, the sub-prime mortgage market collapsed and the financial markets tanked spectacularly, carrying the global economy down with it.

However, as the graphic indicates, despite shrinking along with the rest during the financial market melt-down, they are now slowly climbing back to their old valuations and stood at $1.5 trillions in June 2009. Norway, Abhu Dhabi, Kuwait, Singapore (GIC and Temasek), and China formed the bulk of these holdings.

However, Brad Setser does not feel that the size of these holdings should not raise much concern given that it is dwarfed by the $7 trillion or so held as traditional foreign exchange reserves.

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