Sovereign Wealth Funds: Policy Challenges and Market Implications

State funds that invest savings are not a new phenomenon. At a time when Japan is entering active discussion both about investment by foreign sovereign wealth funds (SWFs) in Japan and the establishment of a Japanese SWF, this symposium was organized to analyze the growing trend. The recent excitement over SWFs is a result of their proliferation, the dramatic increase in their size, and their movement from fixed income to equities. Ms. Ogawa opened the symposium by addressing the recent injection of $37 billion of SWF money into Western financial institutions since April 2007. As she noted, this recapitalization provided much needed relief and eased fears of an extended credit crunch, but it also created significant anxiety with respect to which governments control these funds and what their capabilities and intentions are as investors. SWFs have implications not only for capital markets, but for foreign exchange regimes, trade policy, security policy, and even the progress of democracy in developing economies. Ms. Ogawa asked Mr. Hanna to discuss the market implications that may arise from the increased size and activities of SWFs, and Professor Milhaupt to comment on corporate governance and regulatory issues