Sovereign Wealth Funds in the Making - Assessing the Economic Feasibility and Regulatory Strategies

Abstract

The recent emergence of SWFs as active and important players in international financial markets has raised a host of questions about their likely effect on markets and states. This trend is further reinforced in 2010/2011 by the fact that despite the fears and turbulences that spread all over the world in reason of the global economic and financial crisis, SWFs have blatantly retained their influence. SWFs create a regulatory and theoretical challenge because they serve two masters with very different agendas. This article is the first to explore the challenges governments face when they wish to set up a SWF. It explores determinants and policy options governments have to set up a SWF by analyzing the fiscal and monetary parameters while simultaneously focusing on the regulatory determinants funds may and should comply with in order to be better accepted as international investors. The challenges are important since SWF are expected to grow in the future and might emerge as decisive investors throughout a world in crisis.

Keywords: Sovereign Wealth Funds, international investment law, GATS mode 3

JEL Classification: F00, F02, F21, F23, F36, G38, K00, K33