Guest editorial

Citation

Clacher, I. (2010), "Guest editorial", Journal of Financial Regulation and Compliance, Vol. 18 No. 1. https://doi.org/10.1108/jfrc.2010.31118aaa.001

Guest editorial

Article Type: Guest editorial From: Journal of Financial Regulation and Compliance, Volume 18, Issue 1

The rise of sovereign wealth funds is arguably one of the most significant shifts in global investment flows in recent years. This is not as a result of the size of the investments made, but as a consequence of the nature of the investments. Sovereign wealth investments result in the de facto ownership, and in some cases control, of a corporation by a foreign government. As such the investment activities of these funds, both in terms of where they invest, and who they invest in, are issues of considerable importance.

Sovereign wealth funds are widely criticised for being secret and opaque organisations. The governance and ultimate control of these funds is something that is not well understood, and consequently the investment motives of these funds are treated with suspicion. Underlying these fears is the concern that investments are being driven by a political agenda rather than the standard investment goals of risk diversification and wealth maximisation. Despite attempts to allay fears about their activities, these funds remain controversial and their activities raise concerns at the highest levels of government.

This special issue is made up of three case studies that each considers different aspects of sovereign wealth. Together, the articles build up a picture of how sovereign wealth has evolved and brings to the fore some of the key issues surrounding the debate about sovereign wealth going forward.

The first paper, by Wilson Ng, looks at the growth and evolution of Temasek, the sovereign wealth fund of the Singaporean Government. Specifically, the paper documents how the fund moved away from its initial strategy of managing the government's stakes in key domestic industries to an aggressive strategy of global investment in both developed and emerging economies.

The second paper, by Suntharee Lhaopadchan, looks at the political dimensions of sovereign wealth investments, and the acquisition of Shin Corp. by Temasek. This case in particular highlights both the aggressive nature of sovereign wealth investment, and the potential consequences of sovereign wealth funds buying strategic assets in a foreign country. To this end, there is case that can be made to suggest that Temasek's acquisition of Shin Corp. led to a military coup and the fall of the Thai Government.

The third paper, by Elirehema Doriye, brings to the fore a new dimension to sovereign wealth investment. Currently, the Chinese Government through a wide range of state-owned enterprises is securing much of the untapped natural resources of Africa. Through considerable economic might and a policy of non-intervention in local affairs, human rights and government reform China has moved into a second phase of sovereign wealth investment. As such the activities of China as a sovereign investor already transcend the narrow and somewhat limited investments made by the China Investment Corporation.

Iain ClacherGuest Editor