Sovereign-wealth funds: A new role for the emerging market economies in the world of global finance

Purpose – Over the last two decades global cross-border investment has increased. State-owned and managed, sovereign-wealth funds (SWFs), largely from the emerging-market economies, have started playing a decisive role in underpinning, sustaining and expanding financial globalization. This paper aims to provide the reader with basic conceptual strands on the SWF, their genesis, coming into prime and recent spurt in their operations. Design/methodology/approach – The paper focuses on defining SWFs and tracks their origin and growth. It explores the present and future market size of SWFs and examines the ramifications of this group of large institutional investors. It also answers the query whether anxieties about their operations are exaggerated and attempts to provide answers regarding some of the prickly policy questions. Findings – The paper finds that, although they are an instrument of enhancing liquidity and financial resource allocation in the international capital market, they have become a source of controversies and threaten and escalation in financial protectionism. Originality/value – The paper focuses on the concept of SWFs and the recent spurt in their activities and significance.