Sovereign wealth funds – state-owned entities that invest excess foreign exchange reserves – look set to become the new bogeymen of global finance.

US politicians fear these public sector money moguls are putting a brake on the reform of managed currency regimes in Asia. Others worry that thousands of billions of dollars are now being shunted around international markets with minimal transparency. Yet another concern, especially since China announced it was to launch a sovereign wealth fund, is that global capital flows could become dangerously politicised, thereby increasing systemic risk in banking.