Sovereign Wealth Funds (SWFs) are state-owned investment funds with combined asset holdings that are fast approaching four trillion dollars. Recently emerging as a major force in global financial markets, SWFs have other distinctive features besides their state-owned status: they are mainly located in developing countries and are intimately tied to energy and commodities exports, and they carry virtually no liabilities and have little redemption risk, which allows them to take a longer-term investment outlook than most other institutional investors.
Edited by a Nobel Laureate, a respected academic at the Columbia Business School, and a longtime international banker and asset manager, this volume examines the specificities of SWFs in greater detail and discusses the implications of their growing presence for the world economy. Based on essays delivered in 2011 at a major conference on SWFs held at Columbia University, this volume discusses the objectives and performance of SWFs, as well as their benchmarks and governance. What are the opportunities for SWFs as long-term investments? How do they fulfill their socially responsible mission? And what role can SWFs play in fostering sustainable development and greater global financial stability? These are some of the crucial questions addressed in this one-of-a-kind volume.
This book is an excellent in-depth exploration of how the wealth of future generations can be put to use in addressing the critical issues of our time. Having gone from foe to friend in the global financial crisis, sovereign wealth funds now clearly have an important role to play in improving governance, preserving the planet, sustaining global financial stability, and ensuring long-term growth.
Erik Berglof, chief economist and special adviser to the president at the European Bank for Reconstruction and Development
This book is an excellent and in-depth exploration of how to look at the wealth of future generations with respect to the critical issues of our time. Clearly long term investors and sovereign funds have a prominent place in our shared global values to preserve the planet and to build a more sustainable future.
Robert Tessier, Chairman of the Board of Caisse de dépôt et placement du Québec
SWFs now have major opportunities that are too good to miss - investing for the long term and investing in low-carbon technology. This book provides a road map for actions which can accelerate sustainable investment whilst helping the world manage the macroeconomic crises facing this decade and managing potential future crises of climate change.
Nicholas Stern, London School of Economics and former chief economist of the World Bank
AcknowledgmentsIntroduction1. Keynote AddressesSovereign Wealth Funds--Distinguishing Aspects and OpportunitiesThe Contribution of Institutional Investors to Fostering Stability and Long-Term GrowthSovereign Wealth Funds as StabilizersFinancing Long-Term Investments After the Crisis: A View from EuropeWhat Sovereign Wealth Funds Can Do to Alleviate Global PovertyThe Sovereign Debt Problem2. The State of Sovereign Wealth FundsOverviewThe Rationale for Sovereign Wealth Funds from a Development PersepectiveSovereign Wealth Funds: Form and Function in the Twenty-first Century3. Benchmarking and Performance StandardsIntroductionStabilization FundsTilt of BenchmarksFour Benchmarks of Sovereign Wealth FundsWhich Financial Benchmarks and Other Incentives Work for Long-Term Investing?Further ConsiderationsPanel SummaryPanel Paper: The Four Benchmarks of Sovereign Wealth Funds4. Fostering Development Through Socially Responsible InvestmentIntroductionImpact Investing: A New Asset Class and Its Implications for Sovereign Wealth FundsSovereign Wealth Funds as Catalysts of Socially Responsible InvestingObjectives and Ethical Guidelines of Norges Bank Investment ManagementBuilding Emerging Countries' Financial Infrastructure and Investing in MicrofinanceFurther ConsiderationsPanel Summary5. Expanding Investment Horizons: Opportunities for Long-Term InvestorsIntroductionHow to Reward Long-Term InvestorsSovereign Wealth Funds and the Shifting Wealth of NationsCompensation and Risk-Taking in the U.S. Financial IndustryBuilding Long-Term Strategies for Investment of Sovereign WealthFurther ConsiderationsPanel SummaryPanel Paper: Capital Access Bonds--Securities Implementing Countercyclical Investment StrategiesPanel Paper: L-Shares--Rewarding Long-Term Investors6. Reducing Climate RiskIntroductionInfluencing Clean InnovationsThe Emerging Role of State Investors in the Governance of Global CorporationsThe Rise of Carbon-Free TechnologySmart Energy GlobalizationFurther ConsiderationsPanel Summary7. Managing Risk During Macroeconomic UncertaintyIntroductionMacroeconomic Uncertainty and Managing Risk for Sovereign Wealth FundsFunds and VolatilityManaging UncertainyKey IssuesFurther ConsiderationsPanel Summary8. Manging Commodity Price VolatilityIntroductionManaging Commodity Price VolatilityChile and CopperManagement of Commodity Price Risks on Sovereign Balance SheetsFurther ConsiderationsPanel SummaryPanel Paper: Managing Commodity Risk--Can Sovereign Funds Help?9. Sovereign Wealth Funds and World GovernanceIntroductionReconciling Sovereignty, Accountability, and Transparency in Sovereign Wealth FundsSovereign Wealth Funds: Perhaps We See What We Want to SeeRestrictions on Cross-Border InvestmentThe Value of TransparencyMaximizing Autonomy in the Shadow of Great PowersFurther ConsiderationsPanel SummaryConclusion: Taking Stock--Analytical Challenges and Directions for Future ResearchContributorsAbout the Conference Organizers