Midland Asset Management has recently decided to shift the strategic allocation into certain asset classes due to the influences of sovereign-wealth funds, according to Chief Investment Officer Christopher Holtby. Mr. Holtby asserts strategic investment allocations for clients will avoid high yield bonds, emerging market bonds, high growth stocks and private equity investments.

According to a recent article in the Economist, the British administration of a small South Pacific island beginning in the year 1956 required small amounts of cash set aside from the proceeds of their mined and exported natural resources. The natural resources have since been depleted, but their sovereign-wealth fund investment portfolio has grown to $520 million or nine times the tiny island's GDP. This concept has been copied by Saudi Arabia, Norway, China, Kuwait and other petrodollar/export dominated countries. These sovereign-wealth funds control over $2 trillion of investment portfolios deployed to the global stock and bond markets. Recent research from notable global research firms such as Goldman Sachs and Bear Stearns this torrent of money deployed to a finite pool of assets has had three affects: 1) Bond yields have decreased even with G8 countries raising short-term interest rates, 2) Bond spreads of non-government bonds to comparable maturity government bonds have decreased where junk bonds are yielding close to investment grade corporate bonds and 3) Private equity firms have deployed billions of dollars of capital leveraging the returns of the global stock markets.