In the summer of 2009 I got a call from an acquaintance who worked in the Middle East. He was a young American who worked for something called a sovereign wealth fund, a giant state-owned pile of money that swims around the world in search of things to buy.

Sovereign wealth funds, or SWFs, are huge in the Middle East. Most of the bigger oil-producing states have massive SWFs that act as cash repositories (with holdings often kept in dollars) for the revenues generated by, for instance, state-owned oil companies. Unlike the central banks of most Western countries, whose main function is to accumulate reserves in an attempt to stabilize the domestic currency, most SWFs have a mission to invest aggressively and generate huge long-term returns. Imagine the biggest and most aggressive hedge fund on Wall Street, then imagine that that same fund is fifty or sixty times bigger and outside the reach of the SEC or any other major regulatory authority, and you’ve got a pretty good idea of what an SWF is.

My buddy was a young guy who’d come up working on the derivatives desk of one of the more dastardly American investment banks. After a few years of […]