Sovereign wealth fund investments and policy implications: a survey

Chen Meng (School of International Trade and Economics, University of International Business and Economics (UIBE), Beijing, China AND Leeds University Business School, University of Leeds, Leeds, UK)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Publication date: 13 July 2015

Abstract

Purpose

The purpose of this paper is to address a research gap by providing a comprehensive survey of sovereign wealth funds (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.

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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 state-owned enterprises (SOEs) and multinational enterprises.

Practical implications

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

Social implications

SWFs like other long-term capital is important for economic and job growth. To attract long-term investments, creating an open, unbiased and welcoming investment environment is the key.

Originality/value

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.

Keywords

Citation

Meng, C. (2015), "Sovereign wealth fund investments and policy implications: a survey", Journal of Financial Regulation and Compliance, Vol. 23 No. 3, pp. 210-229. https://doi.org/10.1108/JFRC-10-2014-0041

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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