Philipp Hildebrand: The challenge of sovereign wealth funds Speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the International Center for Monetary and Banking Studies, Geneva, 18 December 2007. I would like to thank Signe Krogstrup for her valuable support in drafting this speech. I also want to thank Rita Kobel, Urs W. Birchler, Daniel Heller and Bertrand Rime for helpful comments and discussions. * 1. *  *  Introduction  I am very pleased to be in Geneva. The International Center for Monetary and Banking Studies (ICMB) provides a wonderful platform to discuss a wide range of economic and monetary policy challenges. On behalf of my ICMB Foundation Board colleagues, I would like to thank Charles Wyplosz for his successful and long-standing stewardship of the ICMB. Tonight, I want to talk about Sovereign Wealth Funds (SWFs). Broadly defined, SWFs are government-owned investment corporations. For the most part, they invest their funds in foreign currency assets. SWFs are usually managed separately from central bank reserves. Unlike other publicly owned pools of capital, such as social security funds or public pension funds, SWFs have no explicit liabilities. As you can see in slide 1, the estimated assets currently managed by SWFs exceed the combined pool of assets managed by hedge funds and private equity firms. Total assets held by SWFs remain small, however, in comparison to the combined assets managed by pension funds and mutual funds worldwide.
So we do know, I promise you, about the job losses and plant closures particularly in manufacturing. Those on the receiving end won't thank me for saying this but some of those problems at the micro-economic level are an inevitable characteristic of every economy. Needs, tastes, technologies and productive techniques are constantly changing even in the most benign macro-economic environment, and the rise and fall of individual businesses or business sectors, as comparative advantage shifts - nationally and internationally - is a painful but necessary facet of economic  BIS Review 85/2001  1  progress. Obstructing such change cannot help in anything but the short term. The more constructive approach is to encourage the redeployment of resources to alternative activities where there is a prospect of comparative advantage. Happily that is the path - the path to greater supply-side flexibility - that is increasingly being followed by UK regional and national authorities. And it's the path being followed here in Wales by the National Assembly under First Minister Rhodri Morgan. It is the path that is being followed by the WDA and its subsidiary Finance Wales, as well as ELWa. If we know at the Bank about plant closures and job losses, we know, too, about NEDS (the Welsh National Economic Development Strategy) and we know about the new activity, creating new jobs, including, for example, Technium. I said a moment ago that some of the current micro-economic problems are inevitable - a normal and necessary facet of economic progress.