State Street releases new Vision Series report on Sovereign Wealth Funds

State Street Corporation, one of the world’s leading providers of financial services to institutional investors,  released its latest Vision Series report on 18 August examining the impact of the recent financial markets on sovereign wealth funds. Entitled  “Sovereign Wealth Funds: Emerging from the Financial Crisis,” the report assesses the funds’ short- and long-term outlook, from investment opportunities to corporate governance issues.

This new Vision paper updates an earlier Vision Series report on Sovereign Wealth Funds published in mid-2008, and highlights the dramatically altered investment and political environment facing these funds due to the global financial turmoil.

“The unprecedented events within the financial marketplace have significantly changed both the public perception of Sovereign Wealth Funds and the way these funds perceive their own role as very large institutional investors,” said Jay Hooley, president and chief operating officer of State Street. “The sizeable challenges and opportunities confronting sovereign wealth funds today compelled us to revisit the themes in our 2008 Vision report to assess the immediate and long-term implications of the crisis.” With renewed debate about the global financial structure and the need for a super-sovereign reserve currency, the Vision report contends that the post-crisis reality has created an excellent basis upon which sovereign wealth funds and the rest of the global financial community can further their cooperation and forge a mutually beneficial coexistence.

The report states, “The funds have experienced substantial declines in both their investment valuations and in the value of the commodities and exports that support their growth. This downturn has prompted a reassessment not only of the funds’ investment assumptions and approaches, but more broadly of their priorities and objectives in a new financial world order.”
The paper also concludes that, “Given the vast pool of assets they represent, sovereign wealth funds will be important participants in shaping the future of global finance.”

Three State Street experts authored the Vision report: John Nugée, managing director of SSgA and head of OIG; Andrew Rozanov, head of Sovereign Advisory and managing director at State Street Global Markets, the investment research and trading arm of State Street; and George Hoguet, senior portfolio manager and global investment strategist at SSgA.