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The Investment Strategies of Sovereign Wealth Funds

The Journal of economic perspectives, 2013-04, Vol.27 (2), p.219-237 [Peer Reviewed Journal]

Copyright © 2013 American Economic Association ;Copyright American Economic Association Spring 2013 ;ISSN: 0895-3309 ;EISSN: 1944-7965 ;DOI: 10.1257/jep.27.2.219

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Title:
The Investment Strategies of Sovereign Wealth Funds
Author: Bernstein, Shai ; Lerner, Josh ; Schoar, Antoinette
Subjects: Countries ; Economic development ; Economic policy ; Entrepreneurial finance ; Financial investments ; Fund management ; Hedge funds ; Institutional investments ; Institutional investors ; Investment advisors ; Investment companies ; Investment funds ; Investment policy ; Investment strategies ; Investment value ; Natural resources ; Nepotism ; Net present value ; Political leaders ; Political leadership ; Politicians ; Private equity ; Public investments ; Public policy ; Sovereign wealth funds ; Studies ; Transparency
Is Part Of: The Journal of economic perspectives, 2013-04, Vol.27 (2), p.219-237
Description: Sovereign wealth funds have emerged as major investors in corporate and real resources worldwide. After an overview of their magnitude, we consider the institutional arrangements under which many of the sovereign wealth funds operate. We focus on a specific set of agency problems that is of first-order importance for these funds: that is, the direct involvement of political leaders in the management process. We show that sovereign wealth funds with greater involvement of political leaders in fund management are associated with investment strategies that seem to favor short-term economic policy goals in their respective countries at the expense of longer-term maximization of returns. Sovereign wealth funds face several other issues, like how best to cope with demands for transparency, which can allow others to copy their investment strategies, and how to address the problems that arise with sheer size, like the difficulties of scaling up investment strategies that only work with a smaller value of assets under investment. In the conclusion, we discuss how various approaches cultivated by effective institutional investors worldwide--from investing in the best people to pioneering new asset classes to compartmentalizing investment activities--may provide clues as to how sovereign wealth funds might address these issues. [PUBLICATION ABSTRACT]
Publisher: Nashville: American Economic Association
Language: English
Identifier: ISSN: 0895-3309
EISSN: 1944-7965
DOI: 10.1257/jep.27.2.219
Source: ProQuest Central

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The Investment Strategies of Sovereign Wealth Funds

Copyright © 2013 American Economic Association ;Copyright American Economic Association Spring 2013 ;ISSN: 0895-3309 ;EISSN: 1944-7965 ;DOI: 10.1257/jep.27.2.219

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