Individual countries are gaining investing clout.
One of the more interesting shifts in investing today focuses on sovereign wealth funds. Thomson reports on companies that are benefiting from bailouts from sovereign wealth funds:
Over the past month, two international banking giants, first UBS and then Morgan Stanley, got a helping hand from the wealth amassed by sovereign nations. Yesterday, Morgan Stanley (MS) announced that it had sold 9.9 pct of its stock to the state-controlled China Investment Corporation. UBS (UBS), meanwhile, got an 11 bln usd injection from the Singapore government's investment arm.
In October, Bear Stearns (BSC) agreed to a 1 bln usd cross-investment from China's government-controlled Citic Securities Co, while Citigroup Inc. (C) received a 7.5 bln usd capital infusion from the investment arm of the Abu Dhabi government.
All of this begs the question: What are sovereign wealth funds?
Basically, sovereign wealth funds are set up by the governments of nations. They are investment funds, usually managing the savings and wealth of a country. Many of the most successful sovereign wealth funds are those that make use of revenue that comes from state-owned commodities like oil. The Citi deal really brought oil dollars to the fore, for example. However, many countries still fund their sovereign wealth funds with foreign currency reserves. While some central banks run sovereign wealth funds, more and more are being managed by official investment companies, set up for that purpose.
For ethical investors, this can muddy the waters. Many sovereign wealth funds are mysterious. (Norway's fund, which comes mainly from oil, is an exception; it has been commended for its transparency). Do you want to invest in a company that has allowed itself to be partially owned by a government awash in oil dollars? Or what about investing in a company that gets some of its capital from the Chinese government, which is known for its human rights abuses?
This is what makes ethical investing so difficult. Where do you draw the line? And is it practical to think that there are companies that are absolutely clean in every way?
Disclosure: I do not own stock in any of the companies above. However, I have bank accounts with Citi.