International

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Prince Andrew, Duke of York

Prince Andrew Defends Sovereign Wealth Funds

May 23, 2008 09:32 AM
by Anne Szustek
An investment vehicle often used by the oil states of the Gulf draws criticism in Europe and America for a relative lack of transparency.

30-Second Summary

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Speaking on the sidelines at the World Economic Forum this week, Prince Andrew, the U.K. special representative for international trade and investment, said “I do not believe there is a problem with the way that SWFs are managed or run.”

SWFs are investment tools used by governments to preserve investment funds. They have been in use since the 1950s as a way to hedge national coffers against economic downturns.

Yet with the steep rise in oil prices over the past 18 months, SWFs have come under fire for what some see as opacity in investments by petrodollar economies. According to the International Monetary Fund, the world’s largest users of SWFs are “the United Arab Emirates, Norway, Saudi Arabia, China, Kuwait and Russia”—all countries with significant petroleum deposits.

The total global value of SWFs currently stands at some $2–3 trillion, but this number is expected to rise to some $6 trillion to $10 trillion over the next five years.

Oil economies, particularly those in the oil-based economies of the Gulf, eager to diversify their investments, have been buying up assets of Western companies. The two richest emirates of the UAE—Abu Dhabi and Dubai—have some $5 billion a week to spend on foreign investments. The world’s largest SWF, the Abu Dhabi Investment Authority, bought a $7.5 billion stake in Citibank last November.

Some Western companies welcome the injections of capital, especially during the current credit crunch. But some fear political motives may be an underlying factor, and are backing protectionist measures.

Headline Link: ‘Duke of York Slams Protectionism Towards Sovereign Wealth Funds’

Video: ‘Corporate Advisory Insight: Sovereign Wealth Funds’

Background: Recent acquisitions by Gulf SWFs; internal economic developments

Opinion & Analysis: SWFs becoming clearer under scrutiny

Reference: Brief economic history of the UAE; investing guide

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