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The New Economics of Sovereign Wealth Funds by Fabio Scacciavillani, Massimiliano Castelli

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Size and Growth of SWFs Assets

Since SWFs have become an issue in the international political debate, estimates of their size and growth have become a matter of intense speculation. New terms such as ‘the new power brokers’ have been struck to describe the dramatic increase in the assets managed directly or indirectly by governments and their potential implications for the global economy (McKinsey Global Institute, 2007). Some of these estimates have proven to be exaggerated as they were based on unrealistic extrapolations of past trends.

In general, one faces several problems when trying to estimate the size and growth of SWFs. First, despite the recent increase in transparency and disclosure of information about their operations, some SWFs do not report the amount of assets they manage and the composition of their investments. Therefore, for certain SWFs only estimates are available and of course these are subject to substantial uncertainty. The lack of detailed information about the performance and the composition of the underlying portfolio of some SWFs creates difficulties in forecasting the growth of their assets in the future. Second, there is not a single agreed definition of SWFs and depending on which funds are included in the estimates, the results can vary considerably. For instance, the Peterson Institute, which has published extensive research on the topic of SWFs, also includes some pension funds, for instance CalPERS, in the definition of SWFs (Truman, 2010). ...

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