“Are Sovereign Wealth Funds (SWFs) meant to be symbols of national strength?”, “Are they more effective vehicles for investment professionals to invest national savings on behalf of a surplus country’s citizens?”, and “Faced with the unwelcome prospect of explaining trillion-dollar losses, is the existence of these large pockets of public surpluses the West’s best insurance against any uncontained military and political confrontations with the East?”
In his latest book on Evolving Roles of Sovereign Wealth Managers after the Financial Crisis: Past, Present and Future, finance professor Bernard Lee clarifies some of the myths surrounding SWFs by using a unified model to explain observed phenomenon that include for example, why Silicon Valley continues to be a global R&D leader despite its public finance chaos, and why savers at surplus countries are “penalised” by astronomical consumer prices while spenders in debtor countries enjoy bargain basement prices. In his framework, the global economy is composed of roughly three types of economies: a) resource economies b) manufacturing economies and c) service economies. The key exports of the service economies are intellectual properties and technical knowhow “packaged” as debts and equities. A natural consequence of this model is that goods and services are increasingly cheaper at service economies due to their ready access to debt financing. This system is self-sustainable as long as the service economies continue to create economic values by innovation or by making sound investments.
Commenting on why he chose to embark on writing this book, Professor Lee said, “Sovereign wealth funds (SWFs) are big and powerful enough to fundamentally change the global financial landscape, but they are also big elephants in the room. Surprisingly, very little has been written about how SWFs should manage their assets under ideal circumstances. Typically, we end up with academics who have never traded professionally advising the largest institutional managers how they should manage massive amounts of assets, or private sector economists eager to sell their employers’ products and services, or central bankers or those at multilateral institutions writing “pre-cleared” policy pieces to advance institutional agendas. I just thought that someone with relevant experience in both private and public sector capacities, and who can write in an academically respectable manner, should say a few objective things about this topic as a service to the public.”
Some of the pertinent contents of the book include: a brief history of sovereign wealth management, factors impacting their investing behavior, risk and performance analysis of real-world SWF portfolios implications of market interventions and also on SWF Investing.
Evolving Roles of Sovereign Wealth Managers after the Financial Crisis: Past, Present and Future retails for US$45/ £30 at all major bookstores.
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