Politicians run states. Socialism is a system where states control capital and services. Therefore it is the politicians who control the state’s capital and services. Sovereign funds by definition are owned and controlled by the state, so, regardless of any other statements; these funds are controlled by politicians as part of a socialist system.

With large pension fund like Calpers, the beneficiaries have a direct say in who runs the fund. In democratic countries like Norway, there is at least some indirect control. In single party states, there is no say whatsoever.  The sovereign fund managers can make any decision he or she wants provided they follow one rule. As described by China’s President Hu Jintao, the rule is that “they remain in agreement with the central committee and resolutely safeguard its authority to ensure its resolutions and decisions are carried out effectively.”

Since these funds are run by politicians, they will be run for political rather than profit incentives. This is a disaster, but not for other countries or the world economy. It is a disaster for the people who are the nominal beneficiaries of the fund. Without independent legal restrictions, the funds will, over time, be lost or more likely diverted. If leaders really wanted to provide for the future they should invest in public goods, roads, hospitals, schools and universities, but they don’t. There is only one future they are worried about, their own.