User:Abdulazizalf/sandbox

Contentions regarding SWFs
The disadvantages of sovereign wealth funds have attracted the attention of investors, lawmakers, politicians and the media due to numerous matters of concerns. An important issue regarding the funds is that some foreign investments by SWFs pose a national security concern because the purpose of the investment might be to secure control of strategically important industries for political rather than financial gain. As asset pools such as the SWFs continues to expand, there is a potential impact of increasing the risks of hedge funds and private equity institutions. The regulated debt to equity ratio held by these funds is 1:10. However, lump sums of cash by SWFs provide these funds with greater unregulated capital. Such risks subsequently poses further risks to the financial markets. Furthermore, what concerns investors and regulators are SWFs' inadequate transparency and minimal accountability such as the size and source of funds, investment goals, disclosure of relationships, and holdings in private equity funds. The emergence of SWFs have also seen a higher demand for more risk averted equities rather than fixed income from rich country bonds.

The advantages of SWFs is that they play a role in stabilizing the financial markets as providers of liquidity. The surplus cash that is enjoyed by SWFs has contributed in rebalancing the allocation of capital in the world economy, by investing in riskier emerging market equities in less wealthy economies rather than risk-free fixed income bonds from developed economies. The majority of SWFs are also governed by a voluntary code of conduct "The Santiago Principles" and maintained by the International Forum of Sovereign Wealth Funds to protect the stability of the global financial system.