An update on sovereign wealth funds

 •  Filed under International economics

In the news

Investment data

Preqin Blog, 2012: "There has been a 16% increase in the number of sovereign wealth funds investing in infrastructure since 2011."

Papers

Avendano and Santiso: Are sovereign wealth fund investments politically biased?

Alexander Dyck and Adair Morse: Sovereign Wealth Fund Portfolios: "SWF allocations are balanced across risky asset classes, very home-region biased, and very biased toward certain industries, in particular, toward finance (owning 4.8% of world equity) and transportation, energy and telecommunication. SWFs invest actively (with control rights) in both public and private sectors, but mainly in these industries in their home regions. We use these allocations to understand better the objectives that drive SWF investment decisions. We find evidence for financial portfolio investor benchmarking and for hedging of income covariance risk. We introduce and test an industrial planning hypothesis as an alternative objective and find this has considerable explanatory power. We find that both measures to capture financial portfolio and industrial planning objectives together explain 14.4% of SWF portfolio variation. Of this, industrial planning accounts for 45%. There is significant variation in the power of industrial planning objectives across SWFs revealing important heterogeneity in this investor class. Industrial planning helps to explain active ownership, predicting higher ownership stakes."

Shai Bernstein, Josh Lerner, Antoinette Schoar: The Investment Strategies of Sovereign Wealth Funds: "SWFs with external managers tend to invest in lower P/E industries, which see an increase in the P/E ratios in the year after the investment. By way of contrast, funds with politicians involved invest in higher P/E industries, which have a negative valuation change in the year after the investment."

Gordon L. Clark andAshby H. B. Monk: The Oxford Survey of Sovereign Wealth Funds' Asset Managers

The Journal of Portfolio Management: The Norway Model

Richard A. Epstein† and Amanda M. Rose: The Regulation of Sovereign Wealth Funds: The Virtues of Going Slow

Adam D. Dixon and Ashby H. B. Monk: Rethinking the Sovereign in Sovereign Wealth Funds