Sovereign wealth fund concerns overblown: study

By Dane Hamilton

NEW YORK (Reuters) - Heightened national security concerns over strategic investing by sovereign wealth funds (SWFs) appear to be overblown, a new study released on Friday found.

The study, conducted by consulting firm Monitor Group, found that the bulk of SWF investing appears to be aimed at furthering the economic development of a host or allied country, not acquiring sensitive strategic or economic assets to advance political aims of a state.

The Monitor Group report comes amid rising national concerns over the growing economic power of SWFs, which are estimated to control up to $3 trillion, fueled by growing trade imbalances with Western trading partners.

Such funds are wielding growing investment clout, having invested $92 billion in publicly disclosed equity transactions in 2007, compared to $3 billion in 2000, Monitor found. The moves have raised concern that some funds may be tools of state governments to acquire strategic foreign assets to advance political aims.

The study, which examined some 1,100 publicly disclosed equity SWF transactions worth an estimated $250 billion between 1975 and 2008, said it is "too early to say whether SWFs constitute a threat to the existing world order."

But it concluded that most SWFs "appear to be purely financial investors," although a few, such as those based in Singapore and the United Arab Emirates, "have pursued transactions to accelerate economic development in their home country."

"The public dialogue on this subject has been very long on concern based on speculation, but relatively short on facts," said William Miracky, a Monitor Group senior partner. "Our sense is that the talk and concern about what they might do is overblown."

The study comes as U.S. and European banks in particular have sought and received billions of dollars in SWF investment to prop up balance sheets hammered by investments tied to subprime mortgage losses.