Sovereign Wealth Funds: The New Intersection of Money and Politics

By Christopher Balding | Go to book overview

CHAPTER 3
How Do You Manage
That Much Money?

Despite their apparent similarity in purpose, sovereign wealth funds (SWFs) manage their assets very differently. Some manage the fund from the central bank, others from the ministry of finance, and others establish quasi-independent bodies to run the SWFs. Some countries use all outside managers, and some retain asset management functions, while most use a combination. Some countries maintain stabilization fund objectives, others focus on economic development, and still others include intergenerational or ethical investment considerations. Some countries post regular updates about fund management and returns while others have legislation preventing any release of information about fund activities. There is a wide range of objectives and outcomes in how countries decided to manage their SWFs. Like a marketplace that contains diverse investors, sovereign wealth funds approach the management of national wealth with a variety of objectives and competing interests. What is less clear and has received less attention is how SWFs should invest their money. It is commonly assumed that sovereign wealth funds should invest like any other institutional investor but it is not clear that this is the appropriate response.

The interest in SWF asset-management activities has focused, to the detriment of related issues, on two separate but related issues. First, SWFs that manage capital on behalf of the citizens of a country should be judged according to standard financial benchmarks. Even legal research frames the behavior of SWFs and stateowned enterprises within the “reasonable private investor standard” (Backer 2009). The research to date indicates a mixed record of investment success by SWFs (Mietzner et al. 2008; Raymond 2008). This result, while disappointing to the government or the citizens of a country, should come as no real surprise, because financial theory holds that returns will be a random walk around a market index. The size and global diversity of SWFs imply that they will replicate a global capital return index depending on their specific allocation between asset classes. The question becomes whether there is any reason to believe that they can deliver superior returns. In fact, there is no basis in fact, theory, or logic that would imply that SWFs should earn excess returns. As noted, and will be studied in greater detail, due to their geographic and investment diversity, sovereign wealth funds replicate a broad basket of financial assets.

-52-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Sovereign Wealth Funds: The New Intersection of Money and Politics
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen
/ 208

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.