and liquidity constraints. like central banks, swfs have traditionally been investors in highly rated fixed income assets. going forward, swfs will increasingly look for investments in equity markets, both public and private ones. several of these investments have recently produced headlines in the global financial press. slide 9 depicts some of them. 3. the challenges in my introductory comments, i suggested that much of the anxiety surrounding swfs stems from the fact that their increasing presence in mature markets presents a challenge to some long - held assumptions about how the global economy works. let me elaborate a little bit on three such assumptions. as you will see, they are very much interlinked. this is shown in table 1 in the appendix. sources : truman ( 2007a, 2007b ), imf, morgan stanley, ft. morgan stanley, standard chartered, deutsche bank and merrill lynch all recently produced estimates, ranging from usd 2. 5 to 3. 5 trillion. global reserves amounted to usd 4. 7 trillion in the second quarter of 2007, according to imf's cofer database. 2006 estimate by mckinsey global institute. the size of pension fund assets held by oecd countries is estimated at usd 13. 2 trillion by the oecd. the estimates of merrill lynch, deutsche bank, morgan stanley and standard chartered are, respectively, that swfs will grow to usd 7. 9 trillion by 2011, usd 9 trillion by 2015, usd 12 trillion in 2015 and usd 13. 40 trillion by 2017. according to snb calculations, excess reserves of developing countries according to the greenspan - guidotti rule reached usd 2. 5 trillion in the second quarter of 2007. these are located in the us ( alaska permanent reserve fund ), australia and norway. first, since the early 1980s, we have witnessed broad - based and sustained political momentum to deregulate and liberalise economic structures, enhance the role of market forces and attempt to reduce the role of governments in the global economy. looking back, ronald reagan ’ s confrontation with the air traffic controllers union in 1981 marks the beginning of this process. most of you in this room would probably concur with the premise that the secular trend to strengthen the role of free markets and competition as the overarching organising principles of the global economy has contributed significantly to the long period of prosperity that the world economy has enjoyed. in this context, swfs represent a potential threat. sizeable state - sponsored foreign investments in mature economies can be perceived

in due time become a significant shareholder in ubs. in the process, ubs will significantly strengthen its balance sheet and thereby maintain a substantial capital cushion relative to the regulatory minimum. a strengthened capital cushion is to be welcomed. first and foremost, it serves as a confidence - building measure. moreover, in uncertain times, a solid capital cushion provides insurance against a further potential deterioration in the global macroeconomic environment. who is this new asian investor in the largest swiss bank? the gic was set up in may 1981 with an original seed capital of several billion dollars from the monetary authority of singapore ( mas ). 28 the central bank reserves had grown steadily throughout the 1970s as a result of public sector surpluses. the gic ’ s objective was to invest the portion of foreign reserves, which was surplus to the needs of the central bank for its monetary policy management, in longer - term assets. the mandate of the gic is to preserve at a minimum the international purchasing power of its assets against inflation and global exchange rate risk. the objective of the gic is commercial, focusing on long - term investment returns. in many ways, it is similar to the objectives of the large european public pension funds. in fact, the gic has exceeded that mandate and has generated an average return of 9. 5 per cent in us dollar terms since inception. the size of the assets managed by the gic is not publicly known. the gic has stated that it manages more than usd 100 billion but some estimates have put their assets under management at over usd 300 billion. the assets of the gic are invested in ten asset classes – developed market public equities, emerging market public equities, private equity, infrastructure, nominal bonds, inflation - linked bonds, real estate, commodities, hedge funds and short - term assets including currency overlay. geographically, its investments are concentrated in the us, europe and japan, but span almost 50 countries. based on what is known about the gic, and judging by the reasoning i have outlined in my lecture this evening, there is little cause for concern about the ubs equity stake the gic will likely acquire. over the past quarter century, the gic has gained a solid reputation as a the original idea of setting up a dedicated government investment institution separate from the mas was conceived by the then deputy prime minister dr goh keng swee and endorsed by the then prime minister lee kuan yew, who continues to serve as the gic