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WHAT ARE YOUR THOUGHTS ON SOVEREIGN WEALTH FUNDS?

With the dollar losing value seemingly by the day, America is, to some extent, on sale, and foreign investors are certainly taking advantage of the situation. Even sovereign states are beginning to invest more frequently in this country through sovereign wealth funds. These funds have been receiving a lot of attention lately due to their investments in companies such as Merrill Lynch and Citigroup, who needed an infusion of cash to get through the credit crunch. But are sovereign wealth funds here to stay, or will they disappear as the American economy begins to turn around. And is it a good idea for foreign nations to be investing in our companies in the first place? More than half of our poll respondents (56%) think that sovereign wealth funds are here to stay. Just over a quarter (26%) believe that they’re a passing fancy and will largely disappear once the economy recovers. A mere 17% view them as a threat to national security. Andrew Stewart, CEO of Cronheim Mortgage, believes that the funds are a growing presence that could actually help improve foreign relations. Here’s what he has to say:

“They’re not a national security threat. On the contrary, I think many of the sovereign funds that are investing in this country are concerned about their own security because they’re the ones receiving military protection from the U.S. If anybody had anything to be afraid of, it’s not us. Not as long as we’re the only military superpower in the world. I don’t know what’s going to happen in the future, but you can say that right now our country is the lone military superpower.

“Are sovereign wealth funds here to stay? As long as the dollar remains weak and things like the price of oil are high and many countries have trade surpluses, then yes. Countries are investing those trade surpluses right back into the U.S. They have limited ability to remove those trade surpluses because if they do remove their dollar-denominated investments, then all they’re going to do is weaken the dollar further, which is going to affect them selling the rest of their investments. Also, because a lot of the sovereign nations that have these funds are also those who receive military protection from this country, it’s hard for them to remove their money. It’s like that age-old rule about banking: if you owe a bank $3 billion, the bank owns you, but if you owe $10 trillion, you own the banks.

“Given other countries’ vested interest in what’s going on in this country, in a way, these funds could help with international cooperation. Many people have a stake in this country. Most countries in the world are still largely dependent on what happens right here. Right now, the country’s on sale because of the weak dollar.

“The sovereign wealth funds are not doing that much direct investing. They’re partnering with experienced developers and funds to invest the money for them. They’re not going out and buying direct assets, they’re investing with other experienced operators. All indications say that’s how they’re going to continue to do it.”

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