More is more in sovereign funds

Some big numbers have been popping up in international finance this year. Perhaps that's only to be expected in the face of a global economy ticking along at a pretty brisk pace, and the low interest-rate era promoting massive money supply growth.

Meanwhile, the wizards of the banking world have been trying to squeeze out extra returns.

The subprime crisis has pointed to the enormous derivatives architecture, running into hundreds and hundreds of billions of dollars, lying underneath the world's banking system.

The consequences of some of the associated lending being on shaky foundations has filtered out to institutions failing in the US and Europe, and to hefty writedowns at major banks such as Citigroup, Merrill Lynch and UBS. This is where those with the surplus cash come into the equation.

A McKinsey Global Institute report earlier this year referred to these players - petrodollar investors, Asian central banks, hedge funds and private equity - as the new power brokers. In fact, they apparently had $8.4 trillion in assets at the end of last year. Presumably, that figure will have risen substantially since. The petrodollar component of that total amounted to $3.4 trillion, of which the GCC countries have between $1.6 trillion and $2 trillion. That overall figure is expected to rise to $7 trillion by 2012 on the assumption of current oil prices continuing.

Of course issues arise, not only in global capital flows but also in economic and political relations, with the huge, potential accumulation of overseas assets. Syed Basher points on the facing page to issues of risk and transparency. But let's just stick to the numbers here.

Among those mentioned in the ranking of names is the Abu Dhabi Investment Authority (ADIA), long-established in the field, and able to take advantage of the emirate's perpetually strong oil revenues, even before prices escalated so much.

In the same McKinsey report ADIA is said reportedly to have $500 billion-$875 billion at its disposal. The same range is quoted in the Truman report cited by Mr Basher, putting it way in the lead among sovereign wealth funds (SWFs).

Research by Morgan Stanley this month happily nominated $875 billion as the figure, more than twice the next of its type, Norway's Government Pension Fund, on $341 billion. So that's the figure that's stuck, then, and it's impressive.

Like buildings rising into the skies vying for supremacy, you might think it would have to be trumped by the $1000 billion mark. But, with international concerns, perhaps any rival fund might deliberately stop short of that level.

Last week Saudi Arabia announced a sovereign wealth fund worth $900 billion. Kind of adds up.