Abstract

By representing a country’s wealth and investing it in foreign markets, sovereign wealth funds (SWFs) play a pivotal role in the global economic landscape and global finance. It represents state-owned investment vehicles that manage vast pools of capital derived from a variety of sources, such as commodity exports or foreign exchange reserves. The dynamics between SWFs and foreign investment, examining the motivations, strategies, and impact on host economies, is what is explored by this paper. The dual nature of SWFs as financial instruments and geopolitical entities, analyzing how they navigate risk, contribute to economic development, and influence international financial landscapes, is delved into. The evolving regulatory landscape surrounding SWFs, addressing concerns related to transparency, governance, and their potential to shape global economic power dynamics, is also highlighted by this paper. Due to their sheer size and long-term investment horizon, SWFs have emerged as significant players in international financial markets, wielding substantial influence. The various investment strategies employed by sovereign wealth funds, encompassing direct investments, portfolio diversification, and participation in infrastructure projects, is further explored by this study. By providing insights into the potential benefits and risks associated with heightened SWF involvement in foreign markets, the impact of SWF activities on recipient economies and global financial stability is scrutinized. In conclusion, a comprehensive overview of sovereign wealth funds and their role in foreign investment, shedding light on the intricate dynamics that shape the global economic landscape, is offered by this paper. This research contributes to a nuanced understanding of the evolving relationship between SWFs and the international investment arena through an in-depth analysis of motivations, challenges and outcomes.

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