Academic

You'd think that most countries would be happy to get fresh billions in foreign investments.  But that hasn't been the reaction to sovereign wealth funds, the hot topic at Davos and in a series of law review articles coming your way.  Quick takeaways from bloggers here, here, here, and here.  The SEC has its own suspicions about the funds, and yesterday, Linda Chatman Thomsen, the director of the enforcement division, tried to explain why.  Looks like the chief worries are the potential for insider trading and the prospect of rendering foreign regulators uncooperative:

we are concerned that some sovereign wealth funds, or persons associated with them, like some hedge funds, or persons associated with them, may undermine market integrity by engaging in insider trading or other market abuses. Sovereign wealth funds, like hedge funds, are relatively opaque. Also, sovereign wealth funds, like hedge funds, have, by virtue of their substantial assets, substantial power in our financial markets. However, in addition to this financial power, sovereign wealth funds, unlike hedge funds, have power derived from being governmental entities, which may give them access to government officials and information that is not available to other investors. There is the potential for these powerful market participants to obtain material non-public information, either by virtue of their financial and governmental powers or by use of those powers, to engage in illegal insider trading using that information.
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Given the inherent difficulties of conducting a cross-border investigation halfway around the world, this kind of cooperation is essential for our effectiveness and the need for the cooperation is increasing. In the context of sovereign wealth funds, we are concerned that if the government from which we seek assistance is also controlling the entity under investigation, the nature and extent of cooperation could be compromised. Indeed, in other contexts, we have seen less than optimal cooperation when foreign governments have an interest in the issue or person we are investigating.