International Investment of Sovereign Wealth Funds (SWFs): Concerns Raised by Western Countries

Abstract

SWFs are long-term investment vehicles that are owned by a sovereign State. However, many perceive that being State-owned simply means being State-directed and that often also means being political and non- commercial. Such perceptions have been more prevalent in Western countries, given that many SWFs have been established by Middle Eastern and Asian States, which often target acquisitions in Western countries. Those concerns were further heightened by the fact that many Asian SWFs have been non-transparent with respect to the objectives of their investment activities. Based on such concerns, many Western countries have adopted more stringent domestic- based regulations to control investments by SWFs and protect their national security. This paper discusses what is defined as SWFs, why Western countries are concerned about such funds, and domestic policies of Western countries to address SWF investments. This paper argues that regulation of SWFs through international instruments is a better strategy to monitor SWF investments.