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December 30, 2007

Terror Free Funds?

Barron's has a quick note regarding the possibility of an international exchange traded fund which excludes companies doing business with "terrorist states."

Legislators in various states have been pushing to limit state pension investments in companies that invest in or do business in countries suspected of sponsoring terrorist groups.

Over the last 2 years labor unions have become more aggressive in using the capital from their pension funds & related investments to influence corporate policy. It appears this phenomenon is not confined to the industrial relations arena as state governments begin to realize the new power they hold (via pension & other funds) to influence foreign policy, corporate behavior and even domestic policy. This also parallels the rise of Sovereign Wealth Funds which are funds controlled by states (countries such as China) that now contain a significant amount of capital.

Whether it is Labor Unions, States or Countries these developments present a serious challenge to the way capitalist economies have worked in the past. What we have here is the potential that billions of dollars in capital will no longer be seeking the highest return but instead will be seeking to influence political & economic outcomes.

December 30, 2007 in Capital Markets | Permalink

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