Sovereign Wealth Funds have risen in prominence during the financial crisis. They acted to recapitalise a number of the World's largest banks including Morgan Stanley and Merrill Lynch. Sovereign Funds are also major holders of government debt and are now being actively courted by European governments to aid in solving the Eurozone debt crisis.
This prominent role is not an accident. High commodity prices and global current account inbalances mean that Sovereign Funds are growing rapidly; and their ability to act as long term providers of capital has also made them attractive as investors. Despite this, Sovereign Funds have been the subject of relatively little academic research by economists. Research to date has focussed on governance, a debate which contributed to many Sovereign Wealth Funds signing up to the Santiago Principles code of Conduct in 2008.
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