State-backed investment entities are better known for allocating commodity-driven surpluses than marketing opportunities in national assets. But the role of these influential institutions is quickly changing. Countries like Turkey and India, among others, are launching funds that are designed in part to attract inward capital. In a sense, the new generation of sovereign wealth funds are trade and investment offices on steroids. Forward-thinking emerging markets may be onto something, amid faltering cross-border activity. The upside is that multinational corporations and institutional investors will have more portfolio choices to satisfy their hunt for yield. Yet that may be optimistic. The downside is that these funds themselves are nothing more than vanity projects designed to flex state muscle on the international stage. That point bodes poorly for the return potential on government-sponsored deals. ■
.Our Vantage Point: The new generation of sovereign wealth funds is inward, rather than outward looking. We applaud the policy innovation, but are concerned about the potential for resource misallocation.
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Image: Sovereign wealth funds move beyond their heavyweight reputation. Credit: Artofphoto at Can Stock Photo Inc.