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This paper aims to investigate the idea of building responsible borrowing and lending into sovereign wealth fund (SWF) decision-making. SWFs, which currently manage US$8 trillion in assets, are influential institutional investors, but their role in sovereign debt markets needs to be further explored. In this context, this paper aims to critically assess the linkages and convergences between the Santiago Principles on SWF and the United Nations Conference on Trade and Development (UNCTAD) principles on responsible sovereign lending and borrowing.

This paper draws on legal scholarship, reports, policy papers and other open-source data to explore the role of SWFs in sovereign lending, borrowing and debt restructuring.

Building responsible borrowing and lending into SWF decision-making is feasible and justified on the grounds of both ethics and public duty. It is also justified in financial terms because it would protect SWFs from irresponsible lending and borrowing practices at the micro level while contributing to global financial stability at the macro level.

This is the first comprehensive study to juxtapose two important normative processes, the Santiago Principles and the UNCTAD Principles.

The purpose of this article is to assess strategies available to recipient states for managing the putative risks posed by sovereign wealth funds (SWFs) in the context of global, liberalized, and capital markets.

The paper employs a game theory analysis in assessing these risks. Four basic scenarios are outlined whereby recipient states may interact with SWFs: “unselfish recipient state – unselfish SWF” (Option 1); “unselfish recipient state – Selfish SWF” (Option 2); “Selfish Recipient State – unselfish SWF” (Option 3); and “Selfish Recipient State – Selfish SWF” (Option 4).

In the light of this analysis, and the balance of risks which the authors perceive recipient states are exposed to in practice, the authors claim that recipient states ought, rationally, to adopt a selfish regulatory strategy irrespective of the strategy which SWFs adopt in practice.

This claim does not deny the importance of voluntary international measures – such as the “Santiago principles” – in the way SWFs are regulated. Rather, it seeks to show that according to a game theory analysis, and an attempted application of that analysis in practice, undue reliance by recipient states on international “soft law” regulatory initiatives to regulate SWF activity (which constitutes the current international consensus) is strategically unwise.

The purpose of this paper is to examine failures in internal and external controls associated with sovereign wealth funds (SWFs), using three caselets to illustrate the fraud triangle theory factors.

This study uses a qualitative research approach. Caselets are used to illustrate the fraud triangle factors associated with SWFs.

Ideally, SWFs would be characterized by opacity and the strategic flexibility to advance political goals, but this operational agility facilitates an environment ripe for fraud, in large part because there is little transparency with regard to their regulatory structure. Elements of the fraud triangle inherent in the structure of SWFs contribute to the fraud found in the three case examples.

The authors use three SWF fraud cases rather than statistical sampling of all SWFs, which limits the generalizability of the findings. Future research should explore additional recommendations for the evaluation of SWF governance.

The overlap between public sector governance and SWF governance creates an environment amenable to fraud, and as a result, fraud has occurred in several SWFs. Governance recommendations should take into account the lessons learned from previous SWF fraud cases.

Ideally, SWFs would be characterized by opacity and the strategic flexibility to advance political goals, but this operational agility may also facilitate an environment ripe for fraud, in large part because there is little transparency with regard to their regulatory structure.

To the best of the authors’ knowledge, this paper is the first to identify the fraud triangle risk factors associated with sovereign wealth funds using SWF fraud caselets.

The purpose of this paper is to explore and evaluate the main segments of existing empirical literature related to Sovereign Wealth Funds (SWFs) and provide a thorough investigation of their research questions, theoretical frameworks, data selections and research methodologies.

The literature on SWFs has been split into three main streams: qualitative studies with theoretical contributions aiming to conceptualize the phenomenon of SWFs; normative assessments of the optimal asset allocations of SWFs; and empirical works that aim to investigate different perspectives of SWFs. The paper attempts to review the state of existing literature relating to these areas by answering specific questions.

Despite their significant size and potential impact, the literature on SWFs seems to be still in its infancy. The paper collects insights from previous literature, addresses its difficulties and challenges.

The characteristics of the previous empirical literature and the challenges facing this line of research offer an insightful thought for the future research works in this topic.

The paper offers a thorough assessment of the existing empirical research on SWFs and shade some light on the techniques and procedures used.

The purpose of this paper is to critically discuss the participation of sovereign wealth funds (SWFs) in the corporate social responsibility (CSR) programmes. Sovereign wealth funds in emerging economies are often involved in corporate social responsibility. However, the 1 Malaysian Development Berhad (1MDB) scandal illustrates the possible use of SWF as a vehicle for corruption and abuse.

The primary objective is to develop good governance practices of CSR by SWFs that could limit corrupt practices. A case study approach is adopted to investigate the CSR involvement of two SWFs – Norway’s Government Pension Fund Global (GPFG) and Abu Dhabi Fund for Development (ADFD).

The finding shows that SWFs should not be directly involved in CSR. It is proposed that independent Non-government Organisations (NGOs), through a competitive funding model, could serve the CSR purpose of SWFs more effectively and bring socio-economic changes in emerging economies.

The funding model identifies the expected outcomes, priorities and uses of the funds. The funding committee should also be independent of the Board and transparent in its allocations.

The purpose of this paper is to provide a detailed overview of the China Investment Corporation (CIC) and its structure, investment activities and possible future investments.

This paper uses a case study approach and builds up a picture of sovereign wealth globally and then focuses on the CIC and issues surrounding the fund.

The key implications from the research are that Asian sovereign wealth is going to be increasingly important in global investment. The CICs investment strategy is evolving and becoming evermore sophisticated. As the fund grows this will result in increased demand for local financial services and expertise and so where representative offices are located will impact on those financial centers.

Future research should expand the scope of the analysis to include other sovereign wealth funds and try to map out a comprehensive picture of sovereign wealth around the world.

This is one of the first papers to look at sovereign wealth and is believed to be the first paper to analyze Asian sovereign wealth and the CIC.

Governments throughout the world have sought, and are seeking, to attract foreign direct investment (FDI) and, for that purposed, have liberalized their national regulatory frameworks for FDI and established a strong international investment law regime. However, there are signs that, as a result of a number of important developments (which are being discussed in some detail in this chapter), governments are re-evaluating their stance toward FDI, or at least certain types of it. This re-evaluation has found its expression in a number of regulatory changes that may eventually lead to a regime that balances the rights of investors and host countries in a manner that places more emphasis on maintaining policy space for host-country governments while still protecting foreign investors.

The purpose of this paper is to analyze the role of sovereign wealth funds (SWFs) in sustaining global economies. The subject of SWFs has increasingly garnered the concerns of policymakers, market players and scholars for two main reasons: First, these funds represent the largest concentration of capital that the world has ever known, with the Arabian Gulf SWFs becoming increasingly important global players, especially during the most recent financial crises. Second, there is the dominant role of national governments in the management of these colossal funds. This paper assesses the contrasting perspectives on SWFs and analyzes the role they can play in sustaining the global economy by engaging in foreign direct investment.

Both descriptive analysis and comparative analysis are used.

SWFs are large and tend to be long‐term investors and have characteristics that are compatible with foreign direct investment (FDI). There is a role for them in sustaining the global economy via FDI. This analysis suggests that only 11 percent of SWFs' investment in FDI is needed in order to counteract the forecast decline of FDI. Initiatives such as the recently established Santiago principles can help to allay the concerns of host and investor nations. This paper concludes that SWFs should be welcomed by market players and policy makers as tools of economic growth.

Current trends indicate that SWFs are playing an important role as a source of foreign investment, and are also reducing the impact of liquidity pressures in the international banking system. The main driving force of their investing in the global market is in securing higher returns. However, there has been unease among Western countries that have concerns that governments could use SWFs to seize control of strategic companies in sensitive sectors, for their own purposes.

The paper assesses the potential contribution of SWFs to FDI and highlights aspects related to fostering a code of conduct that can allay concerns around areas such as transparency, and the extent to which restrictions should be imposed by host governments.

The purpose of this paper is to propose a model of the Islamic sovereign wealth funds (ISWFs) based on Islamic finance principles to modify the precarious image of SWFs from Muslim countries. The Shariah laws are the cardinal direction for this study.

The authors applied a qualitative research technique that consists of three approaches: exploratory case study approach to critically examine and rank the existing status of SWFs; descriptive analysis; and content analysis to present a model of ISWFs in comparison of conventional SWFs.

The authors propose a model of the “Islamic Sovereign Wealth Funds” based on four key pillars: the major Shariah principles; the Islamic corporate governance framework; the Islamic transparency and disclosure framework; and the Islamic corporate social responsibility framework. Furthermore, the authors argue that the potential effect of the ISWFs on Islamic finance and economy will be positive.

The model is an initial work and idea to convert SWFs from Muslim countries into ISWFs, which required an in-depth policy review by governments.

The findings of the paper are useful for policymakers and governments of the Muslim countries to overcome the issues and criticism on SWFs by converting them in ISWFs.

This paper contributes to the literature related to Islamic finance and sovereign wealth fund by presenting a first model of ISWFs for Muslim countries.

Purpose – To study the allocation in equity markets of sovereign wealth funds’ (SWF) investments with respect to other institutional investors. To analyze the role of political regimes in the sending and recipient countries as a determinant of the allocation of SWF investments.

Methodology/approach – We use mutual funds’ investments as a benchmark for SWF investment allocations. We collect data of SWF and mutual fund equity investments at the firm level and analyse them on a geographical and sector basis. We compare target investments for these two groups by looking at the political regime in the sending and recipient country, using different political indicators (Polity IV, Bertelsmann). We provide a comparison of SWFs and pension funds based on governance features related to investment.

Findings – We find that the fear that sovereigns with political motivations use their financial power to secure large stakes in OECD countries is not confirmed by the data. SWF investment decisions do not differ greatly from those of other wealth managers. Although there can be differences in the allocation, political regimes in the recipient countries do not play a role in explaining the allocation of sovereign wealth funds.

Social implications – Investment from public institutions, such as sovereign wealth funds, can have significant implications at the economic and social level. Sovereign funds are potential sources of capital for emerging economies, and therefore can enchance economic growth. It is important to understand to what extent public institutional investors behave differently from private investors. The “political bias” is not a relevant factor for sovereign funds, or for other institutional investors, for allocating their capital. More often than not, their asset allocation strategies converge with other large investors, these being driven by financial and not political bias.

Originality/value of the chapter – The chapter is an original contribution providing a firm-level analysis of equity holdings for two groups of institutional investors. Moreover, it emphasizes the political dimension of institutional investments, highlighting the priorities and constraints of public investors participating in financial markets. The chapter suggests that SWFs do not discriminate by the political regime of the recipient country in their asset allocation.