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Book part
Publication date: 27 September 2011

Christopher Balding and Yao Yao

Purpose – Study the investment and risk management approach of sovereign wealth funds when national wealth including natural resources is accounted for rather than only financial…

Abstract

Purpose – Study the investment and risk management approach of sovereign wealth funds when national wealth including natural resources is accounted for rather than only financial asset.

Methodology/Approach – Using a range of widely used asset classes, we simulate sovereign wealth fund returns when considering only financial assets but also under varying levels of national wealth holdings in oil. We optimize two-asset financial portfolios and three-asset portfolios when including oil to maximize the risk-adjusted returns.

Findings – Sovereign wealth funds by failing to invest for the national wealth portfolio are overlooking a major source of volatility. To reduce the level of volatility associated with yearly national wealth returns, allocating a higher percentage of fixed assets to high-quality fixed income and low-risk equities will maximize the risk-adjusted returns of national wealth for sovereign wealth fund states.

Social implications – By focusing solely on the financial assets managed by sovereign wealth funds, states are exposing themselves to significant national wealth risk.

Originality/Value of the paper – This is the first work to estimate the impact on national wealth of oil-dependent states by failing to account for volatile commodity prices through the investment strategies of sovereign wealth funds.

Details

Institutional Investors in Global Capital Markets
Type: Book
ISBN: 978-1-78052-243-2

Keywords

Article
Publication date: 15 February 2013

Salar Ghahramani

The purpose of this paper is to examine the propensity of sovereign wealth funds (SWFs) for shareholder activism and their potential impact on corporate governance.

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Abstract

Purpose

The purpose of this paper is to examine the propensity of sovereign wealth funds (SWFs) for shareholder activism and their potential impact on corporate governance.

Design/methodology/approach

The study highlights the relationships between SWFs and corporate governance and also applies eight antecedents/determinants of institutional activism to analyze whether SWFs have a predisposition for shareholder activism.

Findings

The study only finds two instances of SWF activism. Additionally, it finds that despite their mostly passive investments, SWFs possess a natural tendency toward shareholder activism. Some are more likely to engage in activism than others, however. SWFs with a higher proportion of their assets invested in equities, those with portfolios fully or partially constructed to emulate the broader financial markets through indexing, and those that depend less on external fund managers are the likeliest candidates for activism. The study also finds that the regulatory environment can curb the natural SWF inclination for activist behavior.

Research limitations/implications

Due to the lack of transparency within the SWF universe, this study largely depends on the limited data available for sovereign wealth funds.

Practical implications

Given the growing importance of SWFs, managers, directors, and policymakers must assess SWF activism, its influence on corporate governance, and its implications for public policy deliberations.

Originality/value

This project, to the best of the author's knowledge, is the first study that applies tested financial models to SWFs in order to determine if they have inherent activist tendencies.

Details

Corporate Governance: The international journal of business in society, vol. 13 no. 1
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 18 June 2019

Georgios Pavlidis

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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

Details

Journal of Financial Regulation and Compliance, vol. 27 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

Open Access
Article
Publication date: 28 July 2021

Sivakumar Velayutham and Rashedul Hasan

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

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Abstract

Purpose

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.

Design/methodology/approach

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).

Findings

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.

Originality/value

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.

Details

Public Administration and Policy, vol. 24 no. 2
Type: Research Article
ISSN: 1727-2645

Keywords

Open Access
Article
Publication date: 15 August 2019

Salman Bahoo, M. Kabir Hassan, Andrea Paltrinieri and Ashraf Khan

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…

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Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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.

Practical implications

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.

Originality/value

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

Details

Islamic Economic Studies, vol. 27 no. 1
Type: Research Article
ISSN: 1319-1616

Keywords

Book part
Publication date: 27 September 2011

Narjess Boubakri, Jean-Claude Cosset and Nabil Samir

Purpose – Run a comparative analysis between investments of sovereign wealth funds (SWFs) and mutual funds, focusing on firm-level, country-level, and institutional…

Abstract

Purpose – Run a comparative analysis between investments of sovereign wealth funds (SWFs) and mutual funds, focusing on firm-level, country-level, and institutional variables.

Methodology/approach – We use a hand-collected sample of 1,845 acquisitions around the world over the last 25 years (251 for SWFs and 1,594 for mutual funds). We then run univariate parametric and nonparametric tests to assess the differences in the investments of both subsamples.

Findings – We review the literature on the determinants of SWFs' investment decisions. Our analysis adds to the scarce available literature on the investment decisions of SWFs and their comparison with other institutional investors. Our results show that, compared to mutual funds, SWFs indeed exhibit different preferences: for instance, SWFs prefer to acquire stakes in larger, less liquid companies which are financially distressed but which also have a higher level of growth opportunities. They also prefer less innovative firms with more concentrated ownership, which are located in less developed but geographically closer countries with whom they do not necessarily share cultural and religious backgrounds.

Social implications – Our results are important for practitioners and firms seeking to attract a given type of institutional investment. They also add insights to the debate on the “hidden” political objectives behind SWF investments in the Western world.

Originality/value of paper – This is the first attempt to empirically assess the differences in the investment choices of SWFs and mutual funds.

Details

Institutional Investors in Global Capital Markets
Type: Book
ISBN: 978-1-78052-243-2

Keywords

Book part
Publication date: 27 September 2011

Elvira Sojli and Wing Wah Tham

Purpose – Study the role of sovereign wealth funds (SWFs) as an example of foreign and politically connected large shareholders, and their impact on firm…

Abstract

Purpose – Study the role of sovereign wealth funds (SWFs) as an example of foreign and politically connected large shareholders, and their impact on firm value.

Methodology/approach – Use a sample of SWF large U.S. investments where SWFs intend to actively engage with management to analyze not only whether but also why SWF investments outperform the market in both the short- and long term from the perspective of internationalization, political connections, and corporate governance.

Findings – Foreign and politically connected large investors, like SWFs, improve firm value through the provision of SWF domestic market access and government-related contracts. In the short run, the market welcomes SWF investments in expectation of potential monitoring and internationalization benefits. In the long run, the target firms’ degree of internationalization and Tobin's q increase substantially after SWF investments. The increase in q is directly related to the number of government-related contracts granted by SWF countries.

Social implications – SWF investment benefits appear to outweigh the costs for firm value and shareholders. The results point to the benefits of large and foreign investors for shareholders.

Originality/value of paper – This is the first work to provide evidence on how foreign government-related shareholders can affect firm value.

Details

Institutional Investors in Global Capital Markets
Type: Book
ISBN: 978-1-78052-243-2

Keywords

Article
Publication date: 4 February 2014

Harry McVea and Nicholas Charalambu

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…

Abstract

Purpose

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.

Design/methodology/approach

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).

Findings

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.

Originality/value

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.

Details

Journal of Financial Regulation and Compliance, vol. 22 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Content available
Article
Publication date: 10 April 2009

Nigel Almond

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Abstract

Details

Property Management, vol. 27 no. 2
Type: Research Article
ISSN: 0263-7472

Article
Publication date: 27 July 2018

Richard B. Freeman

The purpose of this paper is to examine the likely impact of AI robotics technology on the labor market through the lens of comparative advantage.

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Abstract

Purpose

The purpose of this paper is to examine the likely impact of AI robotics technology on the labor market through the lens of comparative advantage.

Design/methodology/approach

The first section reviews the recent success of AI in outperforming humans in cognitive intense activities such as Go, poker and other strategic games, which portends a shift in comparative advantage in human brain power work to machines. It notes the potential for a portfolio of specialized computer algorithms to compete with human general intelligence in work. The analysis contributes to the debate between economists dubious about claims that AI robotics will disrupt work and futurists who expect many jobs to be fully automated in coming years. It advances three “laws of robo-economics” to guide thinking about the new technologies and presents evidence that growing robot intensity has begun to impact the job market.

Findings

The paper finds that the case for AI robotics substantially changing the world of work and the distribution of income is more compelling than the case that it will have similar impacts on wages and employment as past technological changes. It advances an ownership solution to spread the benefits of AI robot-driven automation widely.

Originality/value

To the extent that who owns the robots rules the world, it argues for a concerted social effort to widen the “who” in ownership from the few to the many. It reviews policies to expand employee ownership of their own firm and of the stream of revenue via profit-sharing and gain-sharing bonuses. But the paper notes that ensuring that growth of AI robotics benefits all through ownership will require expansion of workers’ and citizens’ stake in business broadly, through collective investment via pension funds, individual investment in mutual funds and development of sovereign wealth funds.

Details

Journal of Participation and Employee Ownership, vol. 1 no. 1
Type: Research Article
ISSN: 2514-7641

Keywords

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