Sovereign Wealth Funds by ADAMD. DIXON, PATRICK J. SCHENA AND JAVIER CAPAPÉ

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WHAT IS A SOVEREIGN WEALTH FUND?
At the end of the twentieth century, the economic mood was one of triumphant 
market capitalism. The Soviet Union had become a thing of the past; China 
had firmly committed to embracing market logics and integrating itself into the 
world economy; and the neoliberal revolution ushered in by the likes of Ronald 
Reagan and Margaret Thatcher, in the United States and the United Kingdom, 
informed policy choices and policy designs across countries poor and rich alike 
(Harvey 2005). Barriers to trade and the flow of capital had been decisively 
reduced, blurring the boundaries of national markets. The international 
economy increasingly resembled a global economy, criss-crossed by complex 
networks of production and finance, coordinated by multinational corporations 
and financial institutions in global cities such as London, New York, Hong Kong 
and Singapore. A world economy characterized materially and discursively as a 
system of sovereign nation states seemed to have ceded authority and control 
to the market and private actors, retaining only the limited regulatory and legal 
architectures necessary to ensure proper functioning. For many, globalization, 
and the growth of increasingly market-based forms of governance that it brought 
with it, heralded the hollowing out of the state (Cerny 1999). The state, and 
the possibilities it brings as an agent of economic governance, were relegated 
to the sidelines, and delegitimized as the appropriate site for shaping distribu-

tional outcomes. Those decisions, by contrast, were left to the market – a market 
populated with independent private agents.
Driving globalization before and after the millennium has involved, in signifi-

cant part, the increasing expansion and integration of financial markets, or what 
some refer to as financialization (Mader, Mertens & Van der Zwan 2020). The 
2008 global financial crisis, the worst since the Great Depression, demonstrated 
the degree to which many economies had become absorbed by and dependent 
on global financial processes, flows and performance (Clark, Dixon & Monk
2009). Whereas the expansion of financial markets drove globalization, pooling 
ever greater sums of capital to grease the wheels of trade and commerce, the

globalization of financial markets became necessary to capture value creation 
no longer tied to the prospects of a national economy but to those of a global 
marketplace where borders are fluid and, moreover, where value produced from 
economic activity is conferred on the shareholder (Clark & Wójcik 2007; Dixon
2014b). Beginning in the 1980s, the shareholder value paradigm became the 
norm in the global economy. As such, the place of the investor in contemporary 
capitalism, from the individual to private equity firms and large asset managers, 
has become increasingly visible and important (Preda 2005). This contrasts with 
early stakeholder forms of corporate governance, characteristic of the so-called 
“golden age” of capitalism after the Second World War in the advanced dem-

ocracies of Europe, Japan, and to some extent the Anglo-American economies, 
where shareholder value did not receive exclusive priority and, for that matter, 
where financial markets mattered little to the prospects and possibilities of the 
firm (Lazonick & O’Sullivan 2000).
Curiously, globalization and financialization have not actually led to the 
wholesale retreat of the state. Rather than ceding ground to private agents and 
markets, with the state sitting on the sidelines, the last two decades have actually 
seen the growing and direct involvement of states in supposedly free markets. 
The 2008 global financial crisis was a reminder of the critical lender-of-last resort 
role played by the state, and the excesses of unbridled markets. If much of the 
response, at least in the West, was premised on returning to the status quo ante 
whereby state intervention and direct involvement are no longer the norm, the 
global economy is anything but. In particular, state capital in various forms is 
ascendant. For example, state-owned enterprises (SOEs) now dwarf the lar-

gest privately owned multinational corporations and are increasingly integrated 
in global networks of trade and commerce (Bruton et al. 2015; Musacchio &
Lazzarini 2014). Sovereign wealth funds, the focus of this book, have likewise 
become important players in global financial markets, and in some countries 
important domestic investors and owners of capital. These state-controlled 
institutional investors have grown in almost exponential terms, from a handful 
before the millennium to over 90 today, and with assets in excess of $9 trillion.
But the ascendance of SOEs and SWFs does not necessarily portend a return 
to the greater politicization of markets, at least at the operational level of 
these funds and the transactions they make, or a return to non-market forms 
of planning and economic distribution. By contrast, these agents of the state 
are, as most evidence suggests, focused on conforming to market norms and 
expectations in how they operate, how they transact with counterparties and 
how, ultimately, they compete (Rose 2013). In this respect, the market logic 
espoused in the neoliberal revolution of the 1980s is still manifest, though with 
actors that are slightly at odds with what its intellectual forbears had expected 
with regard to the state’s role in the economy (Peck 2010). The liberal norms

Sovereign Wealth Funds by ADAMD. DIXON, PATRICK J. SCHENA AND JAVIER CAPAPÉ