The Case of Sovereign Wealth Funds: A New (Old) Force in the Capital Markets

Darden Business Publishing Cases

ISSN: 2474-7890

Publication date: 20 January 2017


In mid-January 2008, Merrill Lynch announced a $6.6 billion mandatory convertible-preferred share issuance, much of which was placed privately with the Kuwait Investment Authority (KIA), the Korean Investment Corporation (KIC), and the Mizuho Corporate Bank. The case is set during the subprime-mortgage crisis, which plagued banks and depleted their capital. It focuses on the decision of John Thain to issue capital and place it with sovereign wealth funds (SWFs) in an effort to stabilize the company and put it on the road to growth and profitability again. The case describes the various types and origins of SWFs, their orientation, and their recent intensive investment activity in the global financial-services sector. The case also discusses the transparency of SWFs and their role in the global financial system as liquidity-providing long-term players. Finally, Merrill Lynch's decision to issue the specific financial instrument to replenish its capital (mandatory convertible-preferred) and its terms are analyzed.



Allayannis, G. and Loeffler, R. (2017), "The Case of Sovereign Wealth Funds: A New (Old) Force in the Capital Markets", Darden Business Publishing Cases.

Download as .RIS



University of Virginia Darden School Foundation

Copyright © 2008 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.

Please note you might not have access to this content

You may be able to access this content by login via Shibboleth, Open Athens or with your Emerald account.
If you would like to contact us about accessing this content, click the button and fill out the form.