Meng: Sovereign wealth fund investments and policy implications – a survey

Abstract:

This article addresses a research gap by providing a comprehensive survey of SWFs as international institutional investors and clarifying the definition of SWFs. By doing so, this paper aims to provide a balanced set of policy prescriptions towards SWFs.

This paper conducted a comprehensive survey of world major 24 SWFs with assets under management of 500 million USD between 2008 and 2012. Key dimensions include objectives, funding and governance, asset allocation and investment activities.

SWFs are planning institutions with management direction. They present great variety in terms of funding mechanism, governance, asset allocation and investment strategies, but they in essence pursue financial returns. It is not evident that SWFs are primarily motivated by political objectives and distinctively different from other international institutional investors. Difficulty in interpreting SWFs should not lead to the imposition of constraints on SWFs.

More in-depth and dynamic analysis of SWFs requires better data access. For such a purpose, case studies and longitudinal studies should be adopted, with particular emphasis on comparing SWFs with different types of financial institutional investors as well as typical SOEs and multinational enterprises.

This study is trying to demystify SWFs based on a comprehensive survey. As a result, this article may assist investors, policy makers and regulators to gain a better understanding of SWFs, their investment behaviours and rationales behind.

The contribution of this paper is that we provide a deeper understanding of the strategy and empirics of SWF operations. First, after a clearer definition of the phenomenon of SWFs, we can explain their investment strategies and behaviour as firms. Second, we can derive rational policy prescriptions and third we can propose a research agenda that will further deepen our understanding of SWFs and the appropriate policy prescriptions.

 

Available for download here.

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