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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.
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.
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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.
Abstract
Purpose
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.
Design/methodology/approach
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.
Findings
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.
Research limitations/implications
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.
Originality/value
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.
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Daniel A. Nelson, Kate Habershon, Kathryn W. Hambrick, Meghan E. McCarthy, Alexios S. Hadji and Grace Tan
To discuss US, EU and UK tax-related issues that sovereign wealth funds should consider when investing in private funds.
Abstract
Purpose
To discuss US, EU and UK tax-related issues that sovereign wealth funds should consider when investing in private funds.
Design/methodology/approach
Discusses various tax-related structuring, operational, risk-allocation, and economic matters that private funds, sovereign wealth funds and other non-US institutional investors should consider a series when evaluating potential private fund investments.
Findings
Despite the market disruption caused by the COVID-19 pandemic, sovereign wealth funds continued to make significant capital commitments to private funds in 2020 and, as the world emerges from the pandemic, are expected to make similar or greater commitments in 2021 and beyond.
Originality/value
Practical guidance from lawyers with wide experience in international tax planning and investment fund structuring.
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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…
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.
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Where there has been little in‐depth understanding of sovereign wealth funds, the purpose of this paper is to describe the complex nature of one of the world's largest sovereign…
Abstract
Purpose
Where there has been little in‐depth understanding of sovereign wealth funds, the purpose of this paper is to describe the complex nature of one of the world's largest sovereign wealth funds, Temasek Holdings (“Temasek”), whose “active” investment strategy has been emulated by a number of other funds.
Design/methodology/approach
The paper draws mainly on public data in developing a case history of Temasek.
Findings
Based on this data, the paper suggests how the firm's underlying strategy seems to be about pursuing the national interests of its sovereign shareholder in both a commercial and non‐commercial manner.
Research limitations/implications
Consistent with a case‐based approach, the paper presents a single example of a sovereign wealth fund.
Practical implications
The aggressive manner in which Temasek has built up its international portfolio coupled with the mixed impact of its “active” investment strategy raise a number of issues about the nature of an important sovereign wealth fund.
Originality/value
The value of the paper is in its cogent, insightful picture of the development of a sovereign wealth fund that was a pioneer of this phenomenon.
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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…
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.
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Abdulaziz K. Alosaimi and Mishari M. Alfraih
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…
Abstract
Purpose
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.
Design/methodology/approach
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.
Findings
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.
Research limitations/implications
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.
Originality/value
The paper offers a thorough assessment of the existing empirical research on SWFs and shade some light on the techniques and procedures used.
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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…
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.
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This paper aims to systematically review all available evidence on the implications of sovereign wealth funds (SWFs) for various stakeholders (recipients of sovereign investment…
Abstract
Purpose
This paper aims to systematically review all available evidence on the implications of sovereign wealth funds (SWFs) for various stakeholders (recipients of sovereign investment, home countries, which incorporate SWFs and the world at large) and offer future research directions.
Design/methodology/approach
A systematic literature review (SLR) technique is used to review 102 handpicked articles for the period 2005‐2019.
Findings
This review reveals that the literature on the impact of SWFs emerged only during the financial crisis of 2008–2011 and much of it is qualitative in nature. The literature is lopsidedly focused on the impact of SWFs on target firms and there has been a limited empirical investigation of the impact on other stakeholders. There is a lack of consensus in several areas, which calls for additional research. Few areas, which have not been addressed in the literature and can be taken up by future researchers include the impact of SWFs on macroeconomic fundamentals and stock markets of recipient countries, especially emerging economies; implications of SWFs for alternative asset classes; impact on the welfare of citizens and internationalization strategies of home countries; impact on initial public offerings and unlisted corporations; and impact on innovativeness, efficiency and corporate governance practices of target firms.
Originality/value
To the best of the authors’ knowledge, this is the first paper to use the SLR technique to review the literature on SWFs. It considers the impact of SWFs on all stakeholders and covers both qualitative and quantitative literature published over a long period of 2005‐2019. It also systematizes all available evidence on this theme and identifies important research gaps, which may be helpful for academicians, practitioners and policymakers.
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Keywords
Over the last two decades global cross‐border investment has increased. State‐owned and managed, sovereign‐wealth funds (SWFs), largely from the emerging‐market economies, have…
Abstract
Purpose
Over the last two decades global cross‐border investment has increased. State‐owned and managed, sovereign‐wealth funds (SWFs), largely from the emerging‐market economies, have started playing a decisive role in underpinning, sustaining and expanding financial globalization. This paper aims to provide the reader with basic conceptual strands on the SWF, their genesis, coming into prime and recent spurt in their operations.
Design/methodology/approach
The paper focuses on defining SWFs and tracks their origin and growth. It explores the present and future market size of SWFs and examines the ramifications of this group of large institutional investors. It also answers the query whether anxieties about their operations are exaggerated and attempts to provide answers regarding some of the prickly policy questions.
Findings
The paper finds that, although they are an instrument of enhancing liquidity and financial resource allocation in the international capital market, they have become a source of controversies and threaten and escalation in financial protectionism.
Originality/value
The paper focuses on the concept of SWFs and the recent spurt in their activities and significance.
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