 Though sovereign wealth funds (SWFs) have existed for many years, they have only recently captured the public’s attention. SWFs are emerging as key players in global capital markets: with US$3 trillion in assets, they are projected to cross US$12 trillion in as early as 2012. While the investment approaches among SWFs can vary, this new report from Deloitte Research focuses on funds with strategic motives that seek to gain something beyond a typical investment return. The report addresses: | • | The Rise of SWFs: By using excess liquidity stemming from government fiscal surpluses or official reserves at central banks, several governments have created SWFs as state investment vehicles that can help diversify their economies. | | • | The Attractiveness of Financial Services Firms: Some countries use strategic SWF investments to reap externalities that will bolster their plans to develop world-class financial centers. | | • | The Likelihood of SWFs Targeting Insurers: Some emerging markets have not paid adequate attention to the role of insurance services in the development of these financial centers. Acquiring stakes in western insurance firms is likely the fastest way of bringing underdeveloped insurance markets up to par. | | • | The Potential Impact of SWF Investments on Insurers: While SWF investments may generate controversy, some insurance firms may stand to benefit from them. | | • | A Simple Cost-Benefit Analysis for SWFs: For SWFs, the potential benefits of acquiring stakes in insurance firms will likely outweigh the costs. |
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