Investment Objectives of Sovereign Wealth Funds: A Shifting Paradigm

Abstract

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. While SWF investment objectives to some extent reflect inherent characteristics, notable differences in strategic asset allocation (SAA) exist even amongst SWFs of similar types. Even so, this paper shows that the global crisis may have changed SWF's asset allocations in ways that may not be ideal or justified in all cases and that a review of investment objectives may be warranted. It also argues for regular macro-risk assessments for the sovereign, the continued importance of SWFs as a stabilizer in international capital markets, as well as the active role they could play in international regulatory reform.

Sovereign wealth funds: Past, present and future

“…They find that Central Banks manage their foreign assets by placing high weight to safer foreign assets, while SWFs place their foreign asset in high risky portfolios. In contrast, Petrova et al (2011) argue that the portfolio performance of SWFs is highly dependent and change when financial crises happen.…”

“…These above categories are not mutually exclusive. Some funds have multiple-objectives, such as Norway, Australia and Azerbaijan (Petrova et al, 2011).…”

“…The SWF portfolio analysis is conducted by several researchers (Caner & Grennes, 2010;Benedictow & Boug, 2017;Ciarlone & Miceli, 2016;Petrova et al, 2011). Caner and Grennes (2010) carry out a portfolio analysis of Norwegian Government Pension Fund-Global.…”

Sovereign Wealth Funds: A Comparison of the Turkish Sovereign Wealth Fund with the World Samples

“…While some countries create more than one wealth fund for a single target, others use one fund to reach different targets [9]. Generally, the types of funds created by governments and the purposes they serve are listed as follows [14], [15]:…”

The Importance and Perspectives of Sovereign Wealth Funds in the Globalised Economy

“…It is obvious that SWFs "tend to focus their real estate acquisition endeavors on cross-border investment," as documented by Liu [13], for example. According to Petrova et al [14], what it is fundamental is that SWFs' investment strategies and goals distinctly influence the duration of the investment period, which depends on the purpose for which the fund was established. For example, a longer investment period is expected for savings SWFs than for stabilization or monetary funds.…”