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What is a sovereign investment fund?

Sovereign investment fund

A sovereign investment fund refers to a type of sovereign wealth fund (SWF). Sovereign investment funds tend to focus purely on investments in foreign companies. This can cause political concerns in the foreign country and led to the U.S. Foreign Investment and National Security Act of 2007.

Where have you heard about a sovereign investment fund?

Sovereign investment funds can be politically controversial. At the height of the 2008 financial crisis, several funds bought significant holdings in U.S. banks such as Citigroup and Morgan Stanley. Whilst some saw these investments as stabilising the firms, others worried about financial institutions coming under the control of foreign nations.

What you need to know about a sovereign investment fund.

Sovereign investment funds remain the most controversial SWFs, with the arguments over the need for foreign investment versus national security ongoing. In 2015 the Qatar Investment Authority bought Porta Nuova, a complex of 25 buildings in Milan from a private developer without any involvement from the Italian state raising questions of sovereignty and transparency. In the same year, Boris Johnson in his capacity as Mayor of London, said that he was proud that his capital had become “the eighth Emirate on the planet” after Gulf state sovereign investment funds had bought Harrods and the Olympic Park.

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