The lenders of last resort

As Western market regulators prepare to lock up their daughters in preparation for the arrival of more mischief-intent sovereign wealth funds, billionaire Warren Buffett weighs in with his more sober assessment of what this debate is really all about.

"This is our doing, not some nefarious plot by foreign governments,'' said Buffett in his recently published annual newsletter to shareholders.

Buffett once famously described his approach as being fearful when others are greedy, and greedy when others are fearful.

It rather sums up the strained relationship between the SWFs and their critics. Accused of being greedy in their pursuit of the strategic corporate assets of the US and Europe, some American and European politicians fear their national security is now at stake.

Buffett isn't the only high profile figure from across the pond to have spoken out in defence of the funds.

His comments follow those of former Fed chairman Alan Greenspan, who last month told an Abu Dhabi audience that protectionism rather than national security explained much of the opposition to the funds' Westward advance.

This week it was the turn of local private equity houses to join the debate.

The chiefs of Abraaj Capital and Dubai International Capital used a gathering of private equity professionals in Dubai to point out that SWFs are really just doing the job that some central banks should be doing, but aren't.

They have become the lenders of last resort. So instead of criticizing them for sometimes nebulous reasons, Western governments should instead be saying ‘Thanks!' says Abraaj CEO Arif Naqvi.

They were preaching to the converted. The controversy created around the march of SWFs is seen in turn as hysterical, amusing or irrelevant by many who live in the region.

It's also worth noting that some of these organizations have been knocking about for quite some time, most notably the Kuwait Investment Authority, first established in London in 1953.

With the notable exception of the aborted 2006 takeover of P&O-operated ports by Dubai Ports World, political opposition to SWF buying activity has failed to impede their growth in assets or their movement into new markets.

Despite all the huffing and puffing, it seems they won't be going away in a hurry. Should oil remain around US$100, the assets controlled by sovereign wealth funds could be worth as much as US$9 trillion in a decade according to Abraaj Capital.

Dubai International Capital, often seen as an SWF, but in fact a private equity house according to CEO Sameer Al Ansari, believes that a little self-regulation may go a long way in appeasing the funds' critics.

"If we can encourage some of the regional funds to be more transparent, it would take some of the mystique away and make life easier for all of us," he said.

That may be all that is required to ensure that the SWF storm stays in the teacup where it belongs.

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