Second in a two-part series.
Don Emmert/AFP/Getty Images
Sovereign wealth funds from Abu Dhabi and Singapore have invested more than $14 billion in Citigroup.
Sovereign wealth funds from Abu Dhabi and Singapore have invested more than $14 billion in Citigroup. Don Emmert/AFP/Getty Images
Sovereign Wealth Fund Investments
Investments in major financial firms by sovereign wealth funds in the past year include:
- The Government of Singapore Investment Corp. and Abu Dhabi Investment Authority invest $14.4 billion in Citigroup.
- The Kuwait Investment Authority, the Korean Investment Corp. and Singapore's state-run Temasek Holdings invest about $10 billion in Merrill Lynch.
- China Investment Corp. invests $5 billion in Morgan Stanley.
- The Government of Singapore Investment Corp. and an undisclosed Middle East investor invest about $11.5 billion in UBS AG.
- The Qatar Investment Authority, Qatar's sovereign investment fund, acquires a 20 percent stake in the London Stock Exchange.
- China's government-controlled Citic Securities Co. and U.S. investment bank Bear Stearns agree to invest $1 billion in each other.
- Abu Dhabi-based Mubadala Development Co. invests $1.35 billion in The Carlyle Group, a private equity firm.
- China's state investment company invests $3 billion in The Blackstone Group, a U.S. private equity firm.
Sources: The Associated Press, company announcements.
Lindsay Mangum, NPR
Governments made rich by high oil prices have amassed huge funds of cash ready to be invested in the U.S. and around the world. These investment funds, on their own, would represent some of the largest economies in the world.
Governments made rich by high oil prices have amassed huge funds of cash ready to be invested in the U.S. and around the world. These investment funds, on their own, would represent some of the largest economies in the world. Lindsay Mangum, NPR
As major U.S. financial firms stagger under problems caused by the mortgage crisis, foreign governments, from the Middle East to China, are stepping in to invest billions in the faltering banking giants.
But these government-owned sovereign wealth funds, as they're called, are raising concerns because they aren't revealing enough about their operations or intentions, and because of fears that they will influence important American institutions.
Foreign investments in U.S. banks have drawn attention "because people see it as a somewhat sensitive sector," says Mona Sutphen, a former diplomat who is managing director of Stonebridge International, a financial consulting firm. "And it's very high profile, the amounts of money that these funds are investing."
Sutphen, the co-author of The Next American Century: How the U.S. Can Thrive as Other Powers Rise, says the investments have received attention because "the money that these funds are managing has just exploded in the last year or so, at the same time that the U.S. economy is ... declining."
The investment strategies behind the funds varies, she tells Renee Montagne.
"A lot of it depends on the strategy of the country," Sutphen says. "So if you're in the Middle East and most of your money is related to energy, you're looking to diversify out of energy. So you might be taking stakes in retail or banking or technology as a way to balance where you have your investments.
"Some countries with excess reserves are just looking for a high return, wherever that may be," she says.
Investments in U.S. banks by Middle East countries might raise eyebrows, "but for the most part, what we've seen is that these sovereign wealth funds are, in fact, long-term investors," Sutphen says. "I think the fear that you have out there is really about what might happen as opposed to what's actually happening today."
One of the biggest concerns about sovereign investment funds is that they aren't very "transparent." That means that they don't make public their investment objectives and how they are spending their money.
"A very small percentage actually do that kind of reporting, that level of transparency," Sutphen says. But for most, "we have no idea what they're spending their money on," she adds.
"I think their investment activity thus far has shown that they are interested in superior returns, they're interested in making money," she says. "I see it as a vote of confidence for the U.S. economy that they feel the long-term prospects for the United States are positive."