Sovereign wealth funds scale back
That didn't take long. Just a year ago, people were spooked by the rise of seemingly opaque, cash-rich sovereign wealth funds that seemed poised to exercise massive influence via huge investments. They came to the rescue of several financial service companies.
But the world has changed since then. The financial crisis led to some painful lessons, and many are now retreating. Some sovereign wealth funds have pulled back sharply, notes Institutional Investor. Temasek, for example, sold its entire stake in Bank of America at a loss of roughly $4.6 billion. Many others have dialed back their exposure more modestly.
"As for new money, the funds have abandoned their spendthrift ways," notes Institutional Investor. Sovereign wealth funds initiated just 28 deals in the financial services sector in 2009, compared with 49 deals in 2008, according to the Monitor Group. As their ardor for picking stocks cooled, they turned to more passive strategies.
At the same time, many funds face political questions back home about what could be seen as ill-timed investments with government money. Some have been asked to invest locally to help their economies. The fear factor in the West has certainly died down.
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