Sovereign wealth funds (SWFs) are investment funds for government money. Essentially, these are for countries that get huge amounts of capital surpluses, such as China.
Interestingly enough, SWFs are running into some problems as asset values have fallen across the globe. A report from the Monitor Company Group indicates that these funds suffered losses of roughly $67 billion in the past year.
At the same time, there has been a reduction in capital infusions, primarily because of the drop in oil prices.
So, it should be no surprise that SWFs are getting cautious. In fact, some are stopping their investments.
This is the case with Istithmar World (the Dubai sovereign wealth fund). Simply put, the fund made some terrible deals, such as for Barneys and CityCenter (a project in Vegas).
What may happen? It's too soon to tell. But, there is certainly a need for a restructuring. And, the result may be a dismantling of the fund.
And, it's yet another indication that SWFs are not necessarily smart money.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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