This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

Journal of Economic Perspectives: Vol. 27 No. 2 (Spring 2013)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

JEP - All Issues


The Investment Strategies of Sovereign Wealth Funds

Article Citation

Bernstein, Shai, Josh Lerner, and Antoinette Schoar. 2013. "The Investment Strategies of Sovereign Wealth Funds." Journal of Economic Perspectives, 27(2): 219-38.

DOI: 10.1257/jep.27.2.219

Abstract

Sovereign wealth funds have emerged as major investors in corporate and real resources worldwide. After an overview of their magnitude, we consider the institutional arrangements under which many of the sovereign wealth funds operate. We focus on a specific set of agency problems that is of first-order importance for these funds: that is, the direct involvement of political leaders in the management process. We show that sovereign wealth funds with greater involvement of political leaders in fund management are associated with investment strategies that seem to favor short-term economic policy goals in their respective countries at the expense of longer-term maximization of returns. Sovereign wealth funds face several other issues, like how best to cope with demands for transparency, which can allow others to copy their investment strategies, and how to address the problems that arise with sheer size, like the difficulties of scaling up investment strategies that only work with a smaller value of assets under investment. In the conclusion, we discuss how various approaches cultivated by effective institutional investors worldwide -- from investing in the best people to pioneering new asset classes to compartmentalizing investment activities -- may provide clues as to how sovereign wealth funds might address these issues.

Article Full-Text Access

Full-text Article (Complimentary)

Additional Materials

Online Appendix (24.23 KB)

Authors

Bernstein, Shai (Stanford U)
Lerner, Josh (Harvard U)
Schoar, Antoinette (MIT)

JEL Classifications

G23: Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors

Comments

View Comments on This Article (0) | Login to post a comment


Journal of Economic Perspectives


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

JEP - All Issues

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us