This number is influenced greatly by the additional investment SWFs made in US and European banks that have experienced serious losses on sub-prime mortgages. As patient, long-term investors, SWFs are in a position to influence key corporate decisions, such as selection of chief executives or of major acquisition targets. So far, most SWFs have limited their stakes in public companies to less than 10 percent.

However, as their resources grow as recipient countries and corporate boards gain greater familiarity with SWF investors, there is scope for SWFs to exert great influence in their target companies. SWFs are among the most rapidly growing segment of the institutional investor base. Their uniqueness arises in part from their ownership and governance, their provenance and liability structures, and their rapid growth.

They reflect the changing structure of world output and the commodities boom brought about in part by the partial integration of more than 2 billion people in former command economies into the world economy. As SWFs assets grow and their asset allocation shifts, they have the potential to place upward pressure on global equity prices. However, we should be cautious of partial equilibrium analyses, particularly in today’s rapidly changing and technology-driven global economy.

Many factors, including potential asset allocation shifts by retiring baby boomers, will impact global equity prices in the years ahead.