- Udaibir Das, Adnan Mazarei, and Han Hoorn
- Published Date:
- December 2010
The legal framework for the SWF should be sound and support its effective operation and the achievement of its stated objective(s).
Subprinciple 1.1. The legal framework for the SWF should ensure the legal soundness of the SWF and its transactions.
Subprinciple 1.2. The key features of the SWF’s legal basis and structure, as well as the legal relationship between the SWF and the other state bodies, should be publicly disclosed.
The policy purpose of the SWF should be clearly defined and publicly disclosed.
Where the SWF’s activities have significant direct domestic macroeconomic implications, those activities should be closely coordinated with the domestic fiscal and monetary authorities, so as to ensure consistency with the overall macroeconomic policies.
There should be clear and publicly disclosed policies, rules, procedures, or arrangements in relation to the SWF’s general approach to funding, withdrawal, and spending operations.
Subprinciple 4.1. The source of SWF funding should be publicly disclosed.
Subprinciple 4.2. The general approach to withdrawals from the SWF and spending on behalf of the government should be publicly disclosed.
The relevant statistical data pertaining to the SWF should be reported on a timely basis to the owner, or as otherwise required, for inclusion where appropriate in macroeconomic data sets.
The governance framework for the SWF should be sound and establish a clear and effective division of roles and responsibilities in order to facilitate accountability and operational independence in the management of the SWF to pursue its objectives.
The owner should set the objectives of the SWF, appoint the members of its governing body(ies) in accordance with clearly defined procedures, and exercise oversight over the SWF’s operations.
The governing body(ies) should act in the best interests of the SWF, and have a clear mandate and adequate authority and competency to carry out its functions.
The operational management of the SWF should implement the SWF’s strategies in an independent manner and in accordance with clearly defined responsibilities.
The accountability framework for the SWF’s operations should be clearly defined in the relevant legislation, charter, other constitutive documents, or management agreement.
An annual report and accompanying financial statements on the SWF’s operations and performance should be prepared in a timely fashion and in accordance with recognized international or national accounting standards in a consistent manner.
The SWF’s operations and financial statements should be audited annually in accordance with recognized international or national auditing standards in a consistent manner.
Professional and ethical standards should be clearly defined and made known to the members of the SWF’s governing body(ies), management, and staff.
Dealing with third parties for the purpose of the SWF’s operational management should be based on economic and financial grounds, and follow clear rules and procedures.
SWF operations and activities in host countries should be conducted in compliance with all applicable regulatory and disclosure requirements of the countries in which they operate.
The governance framework and objectives, as well as the manner in which the SWF’s management is operationally independent from the owner, should be publicly disclosed.
Relevant financial information regarding the SWF should be publicly disclosed to demonstrate its economic and financial orientation, so as to contribute to stability in international financial markets and enhance trust in recipient countries.
The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.
Subprinciple 18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.
Subprinciple 18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.
Subprinciple 18.3. A description of the investment policy of the SWF should be publicly disclosed.
The SWF’s investment decisions should aim to maximize risk-adjusted financial returns in a manner consistent with its investment policy, and based on economic and financial grounds.
Subprinciple 19.1. If investment decisions are subject to other than economic and financial considerations, these should be clearly set out in the investment policy and be publicly disclosed.
Subprinciple 19.2. The management of an SWF’s assets should be consistent with what is generally accepted as sound asset management principles.
The SWF should not seek or take advantage of privileged information or inappropriate influence by the broader government in competing with private entities.
SWFs view shareholder ownership rights as a fundamental element of their equity investments’ value. If an SWF chooses to exercise its ownership rights, it should do so in a manner that is consistent with its investment policy and protects the financial value of its investments. The SWF should publicly disclose its general approach to voting securities of listed entities, including the key factors guiding its exercise of ownership rights.
The SWF should have a framework that identifies, assesses, and manages the risks of its operations.
Subprinciple 22.1. The risk management framework should include reliable information and timely reporting systems, which should enable the adequate monitoring and management of relevant risks within acceptable parameters and levels, control and incentive mechanisms, codes of conduct, business continuity planning, and an independent audit function.
Subprinciple 22.2. The general approach to the SWF’s risk management framework should be publicly disclosed.
The assets and investment performance (absolute and relative to benchmarks, if any) of the SWF should be measured and reported to the owner according to clearly defined principles or standards.
A process of regular review of the implementation of the Principles should be engaged in by or on behalf of the SWF.
On April 6, 2009, the International Working Group of Sovereign Wealth Funds (IWG), upon completion of its work culminating in publication of the Santiago Principles, established the International Forum of Sovereign Wealth Funds (IFSWF).
The following are the purpose, mandate, and membership structure of the IFSWF.
A. PURPOSE OF THE IFSWF
The IFSWF is a voluntary group of sovereign wealth funds (SWFs). The purpose is to meet, exchange views on issues of common interest, and facilitate an understanding of the Santiago Principles and SWF activities. The IFSWF is not a formal supranational authority and its work does not carry any legal force.
The IFSWF acts as a platform for:
exchanging ideas and views among SWFs and with other relevant parties. These will cover, inter alia, issues such as trends and developments pertaining to SWF activities, risk management, investment regimes, market and institutional conditions affecting investment operations, and interactions with the economic and financial stability framework;
sharing views on the application of the Santiago Principles including operational and technical matters; and
encouraging cooperation with investment-recipient countries, relevant international organizations, and capital market functionaries to identify potential risks that may affect cross-border investments, and to foster a nondiscriminatory, constructive, and mutually beneficial investment environment.
B. MANDATE OF THE IFSWF
The IFSWF operates in an inclusive manner and facilitates communication among SWFs, as well as with recipient country officials, and representatives of multilateral organizations and the private sector. Through its work, the IFSWF contributes to the development and maintenance of an open and stable investment environment, thereby supporting the four guiding objectives underlying the Santiago Principles:
to help maintain a stable global financial system and free flow of capital and investment;
to comply with all applicable regulatory and disclosure requirements in the countries in which they invest;
to invest on the basis of economic and financial risk and return-related considerations; and
4 to have in place a transparent and sound governance structure that provides for adequate operational controls, risk management, and accountability.
C. MEMBERSHIP OF THE IFSWF
The IFSWF members are the SWFs who participated in the IWG and endorsed the Santiago Principles. Membership is open to other funds that meet the Santiago Principles’ definition of an SWF and endorse the Santiago Principles.
The IFSWF meets at least once a year. Meetings for special purposes can be held as required.
The IFSWF can invite relevant recipient countries, and any other person, entity, or organization, private or public, with an interest in the business of SWFs, as observers.
Wouter Bossu is senior counsel in the International Monetary Fund’s Legal Department, where he works primarily on the legal underpinnings of financial stability. Before joining the IMF, he worked in the legal departments of the National Bank of Belgium and the European Central Bank. He holds degrees in law (Leuven) and business economics (Louvain-la-Neuve).
Aaron Brown is director of portfolio management at the Alberta Finance and Enterprise Department. The portfolio management team is responsible for developing investment policies for over Can$40 billion in funds, including the Alberta Heritage Savings Trust Fund, several research and scholarship endowment funds, and the province’s Sustainability Fund. He is also chair of the investment committees for two Alberta public sector pension plans. He has a Bachelor of Commerce degree from the University of Alberta and is a Chartered Financial Analyst.
Thomas S. Coleman has worked in the finance industry for more than 20 years and has developed considerable experience in quantitative modeling, trading, and risk management. Before entering the financial industry, he taught graduate and undergraduate economics and finance at the State University of New York at Stony Brook. He earned a Ph.D. in economics from the University of Chicago, and a B.A. in physics from Harvard University. He is the author, together with Roger Ibbotson and Larry Fisher, of Historical U.S. Treasury Yield Curves, and continues to publish in various journals.
Didier Darcet has been an investment professional since 1989, managing bank capital, hedge funds, and wealth funds. In the 1990s, he was head of the arbitrage and proprietary investment desks at Bank of America in Paris and London. In 1999, he cofounded Insight Finance S.A., a hedge fund asset management company and Insight Research & Trading L.L.C., a U.S. research and development company providing research and models to the asset management industry. Since 2006, he has been cohead of Dedicated Capital Management at Renaissance Investment Management. He is dual qualified as an engineer (Supélec) and an economist (Sciences Po).
Udaibir S. Das is an assistant director in the Monetary and Capital Markets Department of the International Monetary Fund where he heads the Sovereign Asset and Liability Management Division. He leads a team that covers policy and operational issues relating to sovereign balance sheet risk management, debt, reserves and sovereign asset management, and local and regional sovereign bond markets. He is also associated with country-specific vulnerability assessments and financial stability surveillance. He joined the IMF in 1996. Before joining the IMF, he was with the Reserve Bank of India for 18 years. He has participated in various financial sector assessment programs and technical assistance missions, and has been closely associated with several international and regional initiatives in financial sector and capital market areas. He was the resident advisor in Guyana during 1996–98. In his career with the IMF, he has represented staff on various Organisation for Economic Co-operation and Development working parties, the Basel-based Joint Forum, the International Association of Insurance Supervisors, and the International Working Group of Sovereign Wealth Funds. He is a Fulbright-Humphrey scholar with graduate degrees in economics and management. He was a lecturer in economics and finance at Boston University during 1989–91. He has published in several international and professional journals and holds a research interest in central banking, sovereign asset-liability management, nonbank financial institutions, and different aspects of debt and fixed-income markets.
André de Palma is a full professor at Ecole Normale Supérieure de Cachan and at Ecole Polytechnique, Paris. He is a senior member of Institut Universitaire de France and a member of the Centre for Economic Policy Research. He has Ph.D. degrees in physics and economics. He has held faculty positions at Queen’s University, Northwestern University, and University of Geneva. He is a specialist in industrial organization, transportation economics, and decision making under risk and uncertainty. He has published five books and more than 200 articles in international journals. He has also consulted for major financial organizations in Belgium, France, Spain, Switzerland, and the United States.
Michael du Jeu has worked in the finance industry for more than 20 years. He has spent his career managing capital in various forms, heading market-making operations and proprietary investment desks at S.G. Warburg and Lehman Brothers in London in the 1990s; cofounding and comanaging a global macro hedge fund in London between 1998 and 2005; and since 2006, coheading the Dedicated Capital Management unit at Renaissance Investment Management, a specific investment process for long-term wealth creation based on macro analysis and computerized technology. He studied law (Assas Université, Paris).
Thomas Ekeli is counsellor for economic and financial affairs with the Norwegian delegation to the Organisation for Economic Co-operation and Development in Paris, following several years as investment director in the Asset Management Department of the Norwegian Ministry of Finance. He previously worked on monetary policy and financial market issues in the ministry and served as deputy director general of the Economic Policy Department. He was also an international economist with Lehman Brothers in London (1997–2000), chief economist with Pareto Securities in Oslo (2001–04), IMF Petroleum Fund Advisor in Timor-Leste (2004–05), and portfolio manager with Norges Bank Investment Management in London (2005–06). He has an economics degree from the University of Oslo.
Mohamed A. El-Erian is chief executive officer and co-chief information officer of PIMCO. Before rejoining PIMCO in December 2007, he was president and chief executive officer of Harvard Management Company and a member of the Harvard Business School faculty. He earned a B.A. in economics from Cambridge University and doctorate and master’s degrees in economics from Oxford. He spent 15 years at the International Monetary Fund before moving to the private sector in 1998. He serves on the boards of Cambridge in America, the National Bureau of Economic Research, and the Peterson Institute for International Economics. He is a frequent contributor to the Financial Times. His 2008 book, When Markets Collide, was a New York Times and Wall Street Journal bestseller, a 2008 The Economist: Best Book, and winner of the Financial Times and Goldman Sachs 2008 Business Book of the Year.
Obianuju Ezejiofor is a consultant with the Conflict Resolution System at the World Bank. She was a legal research officer at the International Monetary Fund when working on her contribution to this book. She received her legal training in Nigeria and England. She is a Ph.D. candidate at Queen Mary and Westfield College, University of London. Before joining the IMF, she was a legal intern at the United Nations in New York. She also has work experience in the legal sector in both Nigeria and England, and in the Nigerian banking sector.
Antonio Galicia-Escotto is senior economist in the International Monetary Fund’s Statistics Department. He has been a staff member at Banco de Mexico and assistant to the Executive Director at the IMF. He holds a B.A. in economics from the Instituto Tecnologico Autonomo de Mexico and an M.A. in applied economics from American University, Washington. He published several articles on international economics during his tenure at Banco de Mexico and taught at Universidad Iberoamericana in Mexico City.
Kathryn Gordon is senior economist in the Investment Division of the Organisation for Economic Co-operation and Development (OECD). She is currently working on international investment law and investment policy monitoring. She was one of the main secretariat participants in the negotiations that led to the successful review of the OECD Guidelines for Multinational Enterprises and was responsible for OECD research on corporate responsibility. In earlier positions at the OECD, she dealt with fiscal, tax, and regulatory issues. Before taking her position at the OECD, she was a professor at École Supérieure des Sciences Économiques et Commerciales. She obtained a Ph.D. and an M.B.A in finance from the University of California, Berkeley.
Robert Heath is an assistant director in the International Monetary Fund’s Statistics Department. Before joining the IMF, he worked at the Bank of England and HM Treasury in the UK. At the IMF, he has taken a leading role in developing statistical reporting and conceptual standards, being the lead editor and drafter for the Coordinated Portfolio Investment Survey Guide, first edition (1996); “The Statistical Measurement of Financial Derivatives” (1998); External Debt Statistics: Guide for Compilers and Users (2003); and Financial Soundness Indicators: Compilation Guide (2006). He supervised the production of the Balance of Payments and International Investment Position Manual, 6th edition, during 2003–08 and was a member of the Advisory Expert Group on National Accounts for the 2008 System of National Accounts.
Heiko Hesse is an economist in the Middle East and Central Asia Department at the International Monetary Fund, after having worked two years on the IMF’s Global Financial Stability Report. He was an economist at the World Bank (2006–07), working on the Commission on Growth and Development, which brings together 21 leading practitioners from government, business, and the policy-making arenas. In 2005–06, he was a Visiting Scholar at Yale University and a consultant at the World Bank. He also worked at McKinsey & Co., NERA Economic Consulting, and PricewaterhouseCoopers. He regularly contributes to the economics blogs VOX and RGE Monitor, has published in refereed academic journals, and often speaks at conferences and central banks. His recent research has focused on systemic risks, spillovers to emerging-market countries, sovereign wealth funds, local bond markets, banking issues, and Middle East and Islamic finance. He obtained his Ph.D. in economics from Nuffield College, University of Oxford, and his B.Sc. in financial economics from the University of Essex.
Stephen L. Jen is managing director of macroeconomics and currencies at BlueGold Capital, in charge of managing BlueGold Capital’s currency exposures and macro strategies. Before joining BlueGold Capital in May 2009, he was a managing director at Morgan Stanley and, from October 1996 to April 2009, held various roles, including global head of currency research and chief global foreign exchange and emerging markets strategist. Before Morgan Stanley, he spent four years as an economist with the International Monetary Fund, covering economies in Eastern Europe and Asia. In addition, he was actively involved in the design of the IMF’s framework to provide debt relief to highly indebted countries. He also worked for the Board of Governors of the Federal Reserve and the World Bank, and was a lecturer at Massachusetts Institute of Technology and Georgetown University School of Business. He holds a Ph.D. in economics from the Massachusetts Institute of Technology, with concentrations in international economics and monetary economics. He also earned a B.Sc. in electrical engineering (summa cum laude) from the University of California, Irvine.
Peter Kazakevitch supervises the Sovereign Funds Management division at the Ministry of Finance of the Russian Federation as a deputy director of the Department of State Debt and State Financial Assets. He has headed this division (formerly Stabilization Fund Management) since its inception in April 2005. He is responsible for establishing and implementing the Reserve Fund and National Wealth Fund management policy and Federal Treasury cash management. Before joining the Ministry of Finance, he worked at the Bank for Foreign Economic Affairs (Vnesheconombank) for 14 years. He holds a Ph.D. in finance from the Finance Academy of the Russian Federation in Moscow.
Steffen Kern is director for international financial market policy at Deutsche Bank, focusing on international financial market integration and cross-border regulatory convergence between the European Union, the United States, and with countries in Asia and Latin America. Before his current position he served as executive assistant to the chief executive officer of Deutsche Bank Group, following eight years as senior economist for European financial market policy and integration. He holds degrees in economics, politics, and philosophy from the universities of Oxford and Leuven and a Ph.D. from Erasmus University Rotterdam, and is a lecturer in international finance at the University of Mainz.
Espen Klitzing is a principal based in McKinsey & Company’s Oslo office. His main client service focus is on institutional asset management, and he serves insurers, pension funds, and sovereign wealth funds. Before rejoining McKinsey, he held various management and board positions within the Scandinavian insurance and asset management industries. He was the chief financial officer and deputy chief executive officer of Norway’s Government Pension Fund–Global in 2007. He holds a master’s degree from the Norwegian School of Economics and Business Administration.
Julie Kozack is a deputy division chief in the European Department of the International Monetary Fund, where she covers the Russian Federation. She has been with the IMF since 1999 and has worked on a wide range of policy and country issues, including developments in global economics and the role of sovereign wealth funds. She received a Ph.D. in economics from Columbia University. She has also worked as a consultant to the World Bank and as a teaching assistant and research assistant at Columbia University.
Peter Kunzel is senior economist in the European Department of the International Monetary Fund. Over the past 10 years he has worked at the IMF, the Institute of International Finance, and the European Investment Bank on macroeconomic and financial sector issues, capital markets, sovereign asset and liability management, risk analysis, and pricing. He holds a Ph.D. in economics from the George Washington University.
Thomas Laryea is a former assistant general counsel at the International Monetary Fund. He received his legal education in England and the United States. His doctoral thesis was in international civil procedure. Before joining the IMF’s Legal Department in 2000, he was in private practice with Sullivan & Cromwell in New York and London, focusing on international litigation and antitrust. He has also taught European Union Law at the University of London, School of Oriental and African Studies. His work at the IMF has included advice on the IMF’s legal relations with member countries, capital market legal reform, and debt restructuring at the policy and individual country levels.
Doug Laxton is an advisor in the Research Department of the International Monetary Fund. He is currently head of the Economic Modeling Unit and manages a team of economists building macroeconomic models to support monetary and fiscal policy analysis. His team’s modeling work features in the IMF’s World Economic Outlook as well as in the IMF’s numerous reports to the Group of Twenty. He has worked with officials in many countries to help develop macroeconomic models to support a transition to full-fledged inflation targeting. He has a prolific publication record on a wide range of issues.
Luc Leruth has an M.Sc. in mathematics as well as a Ph.D. in economics. He has held a number of academic positions and, before joining the International Monetary Fund in 1993, worked at the Asian Development Bank as a country officer for Pakistan. Before moving to the Paris IMF Offices in Europe in 2005, he was the project coordinator of the Pacific Financial Technical Assistance Center in Suva, Fiji, between 2002 and 2004, then head of the Fiscal Transparency Unit of the Fiscal Affairs Department. He was recently appointed project coordinator of the Central Africa Regional Technical Assistance Center, located in Libreville, Gabon. He has published numerous papers in international journals specializing in economics and other fields.
Diaan-Yi Lin is partner with the Corporate Finance and Principal Investors Practice in the Singapore office of McKinsey & Company and leads its sovereign wealth fund service line in Asia. She has worked extensively with government entities, sovereign wealth funds, and government-linked companies across Asia on topics ranging from defining the role and mandate of government-linked entities, to the importance of corporate governance, to driving performance transformation, and regional development. Before joining McKinsey, she was an investment banker at Credit Suisse First Boston in New York and London, where she was a core member of equity private placements. She received her M.A. (Hons) in law from Trinity Hall, Cambridge University, where she was a Cambridge Commonwealth Trust Scholar and received the Dr. Cooper’s Law Studentship for academic excellence. As a Fulbright Scholar, she obtained an M.B.A., with distinction, from the Harvard Business School.
Jin Liqun is chairman of the Board of Supervisors of China Investment Corporation (CIC). Before joining CIC, he served as ranking vice president, Asian Development Bank (ADB), responsible for operations in the South Asia, the Central and West Asia, and the Private Sector Operations departments. Before joining the ADB, he was Vice Minister, the Ministry of Finance, the People’s Republic of China (PRC). In that capacity, he served as Alternate Governor for the PRC at ADB, the World Bank Group, and the Global Environment Facility. After serving as Alternate Executive Director at the World Bank Group for four years, he was appointed Director General of the World Bank Department of the Ministry of Finance in 1995. The same year, he was promoted to be Assistant Minister of Finance and in 1998 was appointed Vice Minister of Finance. He writes extensively on economics and finance, and has published a number of books in these areas. He holds a master’s in English literature from Beijing Foreign Studies University. He was also a Hubert Humphrey Fellow at the graduate program in economics at Boston University from 1987 to 1988.
Yan Liu is senior counsel in the Legal Department of the International Monetary Fund. Her work at the IMF has focused on operational and policy matters including IMF lending, debt restructuring, and insolvency law reform. Before joining the IMF in 1999, she was a corporate and securities lawyer at Fried Frank Harris Shriver & Jacobson and Milbank Tweed Hadley & McCloy in New York and Washington. She received her legal education in China and the United States and also holds an M.A. in history.
Yinqiu Lu is an economist in the Monetary and Capital Markets Department of the International Monetary Fund. Her work focuses on sovereign asset and reserve management, sovereign debt management, sovereign risk management, capital market development, and financial stability. She has advised country authorities on these issues in many IMF missions and outreach activities. She has published work on sovereign asset management, commodity price hedging, and credit derivatives. She holds a Ph.D. in economics from the City University of New York, an M.A. in economics from Fudan University, and a B.A. from Nanjing University. She is a Chartered Financial Analyst.
Susan Lund is director of research at the McKinsey Global Institute, McKinsey & Company’s economics research arm, in Washington, DC. Her research focuses on global capital markets, with recent efforts assessing the economic consequences of debt and deleveraging and implications of new participants in financial markets. She has authored numerous articles in leading business and academic publications and is a frequent speaker at conferences on economics and financial markets. She holds a Ph.D. in applied economics from Stanford University and a B.A. with highest distinction in economics from Northwestern University.
Rod Matheson is Assistant Deputy Minister of the Alberta Finance and Enterprise Department, where he has responsibility for both the Treasury Management and Risk Management and Insurance Divisions. Treasury Management is responsible for all banking and cash management for the province, and debt origination and financial risk management for the province and various Crown agencies. The division also has responsibility for establishing investment policies for the province’s operating and endowment funds, including the Alberta Heritage Savings Trust Fund, and oversight of the execution of the investment policies and performance of the investment manager. He has a Bachelor of Commerce degree and an M.B.A. from the University of Alberta; he is also a Certified Management Accountant and a Chartered Financial Analyst.
Adnan Mazarei is assistant director of the Middle East and Central Asia Department at the International Monetary Fund. He has made important contributions to the IMF’s policy work, including debt sustainability work for low-income countries, as well as recent work on sovereign wealth funds and the formulation of the Santiago Principles. Additionally, he served for four years as an advisor to IMF management. He has published work on economic issues in the Middle East, and received a Ph.D. in economics from the University of California, Los Angeles.
Christian Mulder is deputy division chief in the Sovereign Asset and Liability Management Division, Monetary and Capital Markets Department of the International Monetary Fund. He has prepared policy papers at the IMF on the methodology for holding official international reserves, and on analyzing and reporting reserves data. He has recently been involved in developing the IMF–World Bank program to advise countries on medium-term debt strategies, supported the efforts to prepare the Santiago Principles for sovereign wealth funds, and helped to develop policies to advise countries on moving from fixed to flexible exchange regimes. He holds a Ph.D. from the London School of Economics and previously worked at the Dutch treasury and lectured at Tilburg University.
Laurent Nordin is a director in McKinsey & Company’s Dubai office. He leads the sovereign wealth funds practice for Europe, Middle-East and Africa and has been serving three leading sovereign wealth funds in the Gulf. His main interests are corporate transformations and governance, both critical areas for sovereign wealth funds. He also leads McKinsey’s involvement in the Gulf Cooperation Council’s Board Directors’ Institute, a not-for-profit organization that he started. He holds a master’s of science in electrical engineering from Supélec and an M.B.A. from INSEAD. Before joining McKinsey, he was a turnkey project manager at Alcatel-Alsthom for four years.
Jens Nystedt is a strategist at Moore Capital with a role in asset management and global macro analysis. He holds an M.Sc. in international finance and a Ph.D. in international economics and finance from the Stockholm School of Economics, Sweden. He worked for almost six years as an economist at the International Monetary Fund, in the Research, Policy Development, Special Operations, and International Capital Markets departments. He also participated in the IMF’s efforts to resolve several sovereign debt restructurings and currency crises across emerging markets. After leaving the IMF, he joined Deutsche Bank with senior research positions in both emerging market and global FX research. He initially joined in 2004 as chief economist for the Emerging Europe, Middle East, and Africa region and head of Local Markets Strategy. He worked at GLG Partners as the chief economist and strategist in 2007–08.
Adrian Orr joined the New Zealand Superannuation Fund in February 2007 from the Reserve Bank of New Zealand, where he was deputy governor and head of financial stability. Before joining the Guardians, he held the positions of chief economist at Westpac Banking Corporation, chief manager of the Economics Department of the Reserve Bank of New Zealand, and chief economist at the National Bank of New Zealand. He also worked at the New Zealand Treasury and the Organisation for Economic Co-operation and Development. He has a master’s in development economics from Leicester University and a Bachelor of Social Sciences from Waikato University.
Michael Papaioannou is deputy division chief of the Sovereign Asset and Liability Management Division, Monetary and Capital Markets Department of the International Monetary Fund. While at the IMF, he has served as a special advisor to the Governing Board of the Bank of Greece. Before joining the IMF, he was a senior vice president for international financial services and director of the foreign exchange service at the WEFA Group (Wharton Econometrics Forecasting Associates) and served as chief economist of the Council of Economic Advisors of Greece. He has also taught at Temple University as an adjunct associate professor of finance and was a Principal Research Fellow at the University of Pennsylvania, Department of Economics. He holds a Ph.D. in economics from the University of Pennsylvania and an M.A. in economics from Georgetown University.
Eric Parrado was the international finance coordinator for Chile’s Ministry of Finance between September 2007 and March 2010. He oversaw the resources of the Economic and Social Stabilization Fund and the Pension Reserve Fund. From 2005 to 2007, he was a senior economist in the Financial Stability Division of the Central Bank of Chile, and from 2000 to 2004, he was an economist for the International Monetary Fund in Washington. He is a consultant for the IMF and the World Bank. As a consultant, he has provided advisory services to the central banks of Bolivia, China, El Salvador, Guatemala, Kenya, and to the government of Mongolia. He holds a Ph.D. and an M.A. in economics from New York University, and a B.A. in economics from the University of Chile.
Iva Petrova was a member of the secretariat of the International Forum of Sovereign Wealth Funds until December 2009. She participated in the drafting of the Santiago Principles as a member of the secretariat of the International Working Group of Sovereign Wealth Funds and coauthored papers on sovereign wealth funds’ institutional and operational practices and on macrofinancial linkages of sovereign wealth funds’ strategic asset allocations. She has worked at the International Monetary Fund since 2004, in the European Department, the Monetary and Capital Markets Department, and currently in the Fiscal Affairs Department. She completed her Ph.D. studies at Michigan State University in 2004. She worked in the Balance of Payments Division and the Research Department of the Bulgarian National Bank in 1997–98.
Jukka Pihlman is an asset management advisor in the Sovereign Asset and Liability Management Division of the International Monetary Fund. He has participated in and reviewed the work of several IMF technical assistance missions on sovereign ALM and reserves management. He was also heavily involved with the International Working Group of Sovereign Wealth Funds in drafting the Santiago Principles, and is currently part of the secretariat team for the International Forum of Sovereign Wealth Funds. Before joining the IMF he was manager of the Risk Unit at the Reserve Bank of New Zealand, which was responsible for the risk-management framework for foreign reserves and domestic market operations. In his earlier career he worked as financial economist in the Market Operations Department of the Bank of Finland and as instructor at the University of Tampere, Finland, from which he holds M.Sc. (economics and finance; statistics and mathematics) degrees.
Andrew Rozanov is a managing director and head of sovereign advisory at Permal Group, where he is responsible for developing relationships with sovereign wealth funds and other official institutions, with a particular focus on providing specialist advice on asset allocation, portfolio construction, risk management, and alternative investments. Previously, he held a similar position at State Street Corporation, where he had focused exclusively on the sovereign sector for almost seven years. Prior to that, he held various positions at State Street Global Advisors and UBS Investment Bank in Tokyo. He holds a master’s degree in Asian studies, with a concentration in Japan, from Moscow State University. He is a Chartered Financial Analyst and holds designations of Financial Risk Manager from the Global Association of Risk Professionals and Chartered Alternative Investment Analyst from the CAIA Association. His work has been published in The Wall Street Journal, Central Banking Journal, The World Today, Professional Investor, and other media. He has also contributed chapters on various aspects of sovereign wealth management to books published by the Asian Development Bank, Gulf Research Center, Chatham House, and Revue d’Economie Financiere.
John Shields is a senior economist in the IMF’s African Department. From 2006 to 2008, as head of the Fiscal Transparency Unit in the Fiscal Affairs Department, he was responsible for the updates of the IMF’s Code of Good Practices on Fiscal Transparency and the Guide on Resource Revenue Transparency. Previously, he led IMF missions to Angola, The Gambia, Liberia, and Malawi. From 1994–98, he served as IMF Alternate Executive Director for the United Kingdom. In the United Kingdom, he worked in both the private and public sectors, including as a senior economic advisor at HM Treasury and the Bank of England. He has published and lectured on macroeconomic policy and labor market issues. He holds a mathematics degree from the University of London, Imperial College, and an economics degree from the University of Cambridge.
Martin Skancke is director general of the Norwegian Ministry of Finance and head of the Asset Management Department. He has previously worked on monetary policy and public finance issues in the ministry, and served as deputy director general of the Economic Policy Department from 1994 to 2001. From 2002 to 2006 he was director general and head of the Domestic Policy Department of the Office of the Prime Minister. He has also worked as a management consultant for McKinsey & Co. He has a business degree from the Norwegian School of Economics and Business Administration and an M.Sc. (economics) from the London School of Economics, in addition to a Russian language degree from the University of Oslo. He is a certified financial analyst.
Krishna Srinivasan is chief of the Multilateral Surveillance Division in the Research Department of the International Monetary Fund. He has been with the IMF since 1994 and has served in various capacities across many departments. He secured his Ph.D. in international finance in 1993 from Indiana University, Bloomington. He has also been a consultant to the World Bank and the Planning Commission in India. He has published several papers at the IMF and in academic journals.
Alison Stuart is a senior economist in the Emerging Markets Division of the Strategy, Policy, and Review Department of the International Monetary Fund. Before joining the IMF, she worked in the UK Executive Director’s office of the IMF and World Bank. She has many years’ experience as a macroeconomist at the Bank of England and HM Treasury.
Tao Sun received his Ph.D. in economics from the Chinese Academy of Social Sciences in 1998 and began working first in the International Department and then the Financial Stability Bureau of the People’s Bank of China, focusing on the annual China Financial Stability Report. Since 2007, he has been an economist in the Monetary and Capital Market Department at the International Monetary Fund. He is now part of the team that produces the semi-annual Global Financial Stability Report and a member of the China Financial Stability Assessment Program. His recent research has focused on systemic risks and prudential regulation frameworks, global liquidity and capital flows, spillovers to emerging-market countries, asset prices, and sovereign wealth funds.
Alexandra Trishkina is a deputy head of the Capital Markets Funding Division in the Department of State Debt and State Financial Assets at the Ministry of Finance of the Russian Federation. She assumed that position in March 2010 and is responsible for issuing external government debt. She worked in the ministry’s division that was responsible for management of the Reserve Fund and the National Wealth Fund since the division was established in 2005, developing and implementing fund management policy. She was engaged in management of the Stabilization Fund’s assets before it was transformed into the two new funds in 2008. Before joining the Ministry of Finance, she worked at the Federal Treasury for three years, where she dealt with Russian government bonds. She graduated from the Russian Academy for Foreign Trade under the Ministry of Economic Development and Foreign Trade in Moscow.
Edwin M. Truman, senior fellow at the Peterson Institute for International Economics since 2001, served as assistant secretary for international affairs at the U.S. Treasury from December 1998 to January 2001 and as counselor to the secretary from March to May 2009. He directed the Division of International Finance of the Board of Governors of the Federal Reserve System from 1977 to 1998. He has been a member of several international working groups and has taught at Yale, Amherst, and Williams. He is the author, coauthor, or editor of Reforming the IMF for the 21st Century (2006), A Strategy for IMF Reform (2006), Chasing Dirty Money: The Fight Against Money Laundering (2004), Inflation Targeting in the World Economy (2003), and Sovereign Wealth Funds: Threat or Salvation? (2010). He has a B.A. from Amherst College and a Ph.D. from Yale University, both in economics.
Han van der Hoorn is an asset management advisor in the Sovereign Asset and Liability Management Division of the International Monetary Fund. In that position, he works with and advises central banks and sovereign wealth funds on strategic asset allocation and risk management. Before joining the IMF, he was a senior economist in the Risk Management Division of the European Central Bank, and held various positions in supervision, asset management, and risk management at the Dutch central bank. He started his career at Coopers & Lybrand. He holds master’s degrees in econometrics from Erasmus University and economics from the University of Amsterdam.
Mauricio Villafuerte is deputy division chief in the Fiscal Affairs Department at the International Monetary Fund. He is a Ph.D. candidate in economics at the University of California, Los Angeles. Before joining the IMF in 1997, he worked at the Ministry of Finance and the Central Bank of Ecuador. He specializes in fiscal and monetary policy issues in natural resource–dependent countries, having worked extensively on oil-producing countries (e.g., Nigeria, Norway, República Bolivariana de Venezuela), and has produced several publications on fiscal policy management and fiscal institutions (specifically fiscal rules and oil funds) in those countries. More recently, he has been involved in the design of strategies for fiscal consolidation and the management of sovereign balance sheet risks in the postcrisis world.
Note: Figures, boxes, and tables are indicated by f, b, and t, respectively.
Abu Dhabi Investment Authority (ADIA), 8, 10–11, 207
Aging populations, 16
Alberta Heritage Fund, 259–261
Alberta Heritage Savings Trust Fund Act, 259
Assets, 26–28, 126, 127f
classes by volume, 27f
conditional dependence, 162–163
idiosyncratic risks, 159–160
projected 2013, 12f
projected growth through 2020, 30f
regional distribution, 26f
Assets Supervision and Administration Commission, 5
Australia, national policy responses, protectionism, 33–34
Balance of Payments and International Investment Position Manual (BPM6), 87t, 90–91
Bank share prices, 31, 32f
Bilateral investment treaties (BITs), 77
BPM6. See Balance of Payments and International Investment Position Manual
Capital account liberalization
BITs and, 77
COMESA and, 78
domestic law, 76
EU and, 78
GCC and, 78
IMF Articles of Agreement, 78–79
IMF financing, 80
IMF jurisdiction, 79–81
IMF surveillance, 79–80
IMF technical assistance, 80
international law, 76
NAFTA and, 77–78
regional trade, investment treaties, 77–78
soft law, Santiago Principles, 81–83
Capital sources, risk tolerance, 129–131
CDIS. See Coordinated Direct Investment Survey
Central bank investment strategies
equities, corporate bonds, 133f
foreign reserves, 6f, 125
SWFs vs., 132–134, 205–206
Central Bank of Chile (CBC), 262–263, 265–269
CFIUS. See Committee on Foreign Investment in the United States
Chilean fiscal policy, SWFs, 47
asset allocation, 264f
capital contributions, 262–263
current investment policy, 270f
ESSF, 260, 262–263, 267, 267f
fiscal, monetary stimulus, 268f
fiscal savings rate, 263f
global financial crisis, 266–269
governance structure, 264f
institutional framework, 263
China Investment Corporation (CIC), 212, 242, 271–273
China State Administration of Foreign Exchange (SAFE), 6, 207
Classification implications, 137, 138–139t, 140
Code of Good Practices on Fiscal Responsibility, 54
COFER. See Currency Composition of Foreign Exchange Reserves
COMESA. See Common Market for Eastern and Southern Africa
Commercial vs. political objectives, 62
Committee on Foreign Investment in the United States (CFIUS), 35, 237–238
Common Market for Eastern and Southern Africa (COMESA), 78
Conservative, passive investors, 7
Contingent pension reserve funds, 60
Coordinated Direct Investment Survey (CDIS), 88–89, 88t
Coordinated Portfolio Investment Survey (CPIS), 86, 88–89, 88t
Corporate governance, 33
Corporate ownership, global, 26–30
Cost of risk, 159–160
CPIS. See Coordinated Portfolio Investment Survey
Cross-border investments, 26–30, 86, 87–88t, 88–89
Currency Composition of Foreign Exchange Reserves (COFER), 88t
Data Quality Assessment Framework (DQAF), 87t
Declaration on Sovereign Wealth Funds and Recipient Country Policies (OECD), 37–38, 81
Development funds, 46, 49, 60, 96
Domestic financial crises, 19–20
Domestic policy goals, 15–16, 61
Domestic sovereign investments, 252–255
Domestic stakeholders, 62
Domestic statistics, 89–90
DQAF. See Data Quality Assessment Framework
Drawdown risk, 160f
Dubai Ports World, 237
Dutch disease, 6, 15, 19, 60, 276
Economic and Social Stabilization Fund (ESSF), Chile, 260, 262–263, 267, 267f
Emerging-economy reserves, 187f
Emerging markets, 10–11, 211–212, 211f,215f
Endowment funds, 6, 151
ESSF. See Economic and Social Stabilization Fund
European Free Trade Association, 34
European Union (EU), 35–36
country of target firms, 178f
empirical results, 180, 182–183
events by acquiring SWF, 178f
literature review, 174–176
SWF investments/divestments, ratios, 179f
SWF investments/divestments, stock market reactions, 181–182t, 183–184t
Exchange rate issues, 22
External fund managers, 97–99
External sector statistics, 90–91
Financial market stability, 31
Financial risk-return balance, 130f
Financial utility function, mathematical translation, 159
FINSA. See Foreign Investment and National Security Act
FIRB. See Foreign Investment Review Board
Fiscal policy, 20–21
Fiscal stabilization, 44
FOI. See Freedom of Investment Roundtables
Foreign Acquisitions and Takeovers Act, 33
Foreign Investment and National Security Act (FINSA), 35, 237
Foreign Investment Review Board (FIRB), 33
Foreign investors in U.S. and EU
bank share price effects, 31, 32f
corporate governance, 33
financial market stability, 31
state funding, 31–32
strategic assets sale, know-how, 32–33
adequate levels, 16–17
ample reserves options, 18–19
in central banks, 6f
Freedom of Investment (FOI) Roundtables, 113, 117, 120
Fund for Economic and Social Stabilization, Chile, 47
GCC. See Gulf Cooperation Council
General Data Dissemination System (GDDS), 87t
Generally Accepted Principles and Practices (GAAP), 38, 281–284
oversights, implementation, 38
support, adherence, 38
Germany national policy responses, protectionism, 34–35
Global financial crisis, 8–9, 9f, 144–148, 192–194, 225–233, 245–248
communication, post crisis, 232–233
governance, post crisis, 230–231
investment processes, post crisis, 231–232
macroeconomic policy framework, SWF role, 49, 49b
postcrisis SAA, 143f 147f
Global Integrated Monetary Fiscal Model (GIMF), 198–199
Global markets, 61–62
SWF absolute, relative size in context, 206–209
SWF investments, 210–212, 211f
SWF investments, market participants reaction, 215–217
SWF market impact, transparency, 217–218
SWF publicly announced equity investments impact, 209–210
SWF shift from official reserves, market and macro implications, 212–215, 215f
SWF value, by target sector, 214f
Global portfolio construction, 168–170
Good conduct rule, 37–38
Governance, post global financial crisis, 230–231
Government holding companies, 7
Governments role, 96
Greenspan-Guidotti rule, 17
Gross value of transactions, 194t
by 2015, 126
after 2002, 4
profile, returns vs. risk, 127–129, 128f
projected through 2020, 30f
prospects, post 2008, 11
Gulf Cooperation Council (GCC), 78
Hedge Fund Research, 207
ICAPM. See Intertemporal capital asset pricing model
IFSWF. See International Forum of Sovereign Wealth Funds
IIAs. See international investment agreements
IIP. See International Investment Position Statistics
IMF. See International Monetary Fund
Industrial and Commercial Bank of China, 11
International Forum of Sovereign Wealth Funds (IFSWF), 39, 72, 236, 285–286
International investment agreements (IIAs), 36
International Investment Position (IIP) Statistics, 87t
International Monetary Fund (IMF)
Articles of Agreement, 78–79
capital account liberalization and, 78–81
jurisdiction, current payments restriction, 79–81
SWFs and, 59–60, 71
technical assistance, 80
International open markets, regulatory environments, 35–37
International Organization of Securities Commissions, 63
International Working Group of Sovereign Wealth Funds (IWG), 38–39, 59, 285
Intertemporal capital asset pricing model (ICAPM), 210–214
Investment barriers, 35–37
Investment Company Institute, 219
Investment flows, transparency cross-border data, 86, 87–88t, 88–89
domestic statistics, 89–90
external sector statistics, 90–91
SWFs statistic data reporting practices, 91–92, 91f 92f
Investment strategy, 163–170, 231–232
annualized earnings growth in U.S. 1985–2008, 167f
global portfolio construction, 168–170
investment places, types, 210–212
price-to-book measurement, 170
returns to S&P 500 as function of P/E, 166f
risk-management discipline, 168
static vs. dynamic allocation, 163–165
tail event risk management, 169–170
top-down macroeconomic analysis, 165–166
total percentage returns to equities, S&P 500, 1901–2009, 167t
value investing, 166–168
Investments, asset sales, 28f
Investments value, by target sector, 214f
Istithmar World, 8
IWG. See International Working Group of Sovereign Wealth Funds
Khazanah Nasional Berhad, 5
Kiribati’s Revenue Equalisation Reserve Fund, 4
Korea Investment Corporation, 47
Kuwait Declaration, 236
Kuwait Investment Authority, 4, 7, 10
Lisbon Treaty, 35
Long-term investors, risk-return perception
drawdowns by asset class, 157t
equity risk over economic cycle, 156
long-term assets’ return, 152–153
long-term drawdown risk, single asset class investment strategies, 156–157
long-term vs. short-term risk-return trade-offs, 153–156
losses, historical returns, 1907–2008, 155f
real returns across U.S. asset classes, 1928–2008, 153t
real U.S. equity returns by category, 1925–2008, 153t
single asset class strategies, 156–157
VaR for higher-volatility equities, 154
Macroeconomic impacts estimated assets under management, end-2008, 190t
macroeconomic stabilization, 44
projections by region, 192f
SWFs by type, percent share assets under management, 191f
SWFs, current/future size, 189, 191–192
Macroeconomic policy framework, SWF role, 20–22
aggregate demand, economic activity, 45
asset-liability management, 52–53, 56
direct resource spending, 55
domestic economy impact, 44–46, 61
domestic market investing, 55
economic policy coordination, 56
fiscal risks, public sector’s balance sheet, 51–52
global financial crisis and, 49, 49b
investment barriers, risk tolerance, 53
monetary, exchange rate policies, 45, 50–51
national budget relationship, 50
objectives, 44, 47b
operational framework, 46–50, 55
private sector behavior, 45–46
public spending path, 45
returns from public resources, 46
SWF accounting, 53–54
SWF types, overall policy objectives, 46
transparency, 54–56, 61
vulnerable economy, 46
Market impact, transparency, 217–218
basic assumptions, 100–103
dynamic model, learning by investing, 111–112
imperfect information, 104–106
model simulations, 198–199, 200–202f, 203–204
P-A model, 99–103, 101f, 106–110
perfect information, 103–104
results, interpretations, policy implications, 103–106
theoretical considerations, 99–103, 100f
25:45:30 long-term model portfolio, 131–132
Monetary policy, 21–22, 45, 50, 266–268
Mubadala Development Company, 7
NAFTA. See North American Free Trade Agreement
National policy responses, protectionism
Russian Federation, 34–35
United States, 35
National Wealth Fund, Russian Federation, 7
New funds, targeted goals, 11
New Zealand Superannuatation Fund, 273–276
Nontraditional asset class diversification, 10
North American Free Trade Agreement (NAFTA), 77–78
Norway Government Pension Fund-Global, 8, 28, 47, 131, 207, 215
OECD Guidelines on Corporate Governance of State-Owned Enterprises, 68
Organisation for Economic Co-operation and Development (OECD), 60, 63–64, 236–237
advocacy, guidance, 113–114
background documents, 120–121
FOI Roundtables, 113, 117, 120
national security vs. protectionism, 115–117, 118–119b
OECD investment instruments, 121
P-A model, 99–103, 101f, 106–110
Passive investors, 7
Pension Reserve Fund (PRF), Chile
asset allocation, 264f
capital contributions, 262–263
fiscal savings rate, 263f
governance structure, 264f
institutional framework, 263
investment policy, 263–265
market value, 268f
Pension reserve funds, 46, 138–139t
Postcrisis SAA, 143f, 147f
Price-to-book measurement, 170
Primary sources of funds, 92f
Projections by region, 192f
Publicly announced equity investments, market impact, 209–210
Pula Fund, 4
Qatar Investment Authority, 10–11
Real returns across U.S. asset classes, 1928–2008, 153t
Real U.S. equity returns by category, 1925–2008, 153t
Recipient-country investment policies, OECD perspectives
advocacy, guidance, 113–114
background documents by, 120–121
FOI Roundtables, 113, 117, 120
national security vs. protectionism, 115–117, 118–119b
OECD investment instruments, 121
Regulation, 95–96, 149
Relative buy/hold returns, asset classes, 128f
Republic of Korea, 47
Reserve Assets and the Data Template on International Reserves and Foreign Currency Liquidity (Data Template), 87t
Reserve investment corporations, 46, 60
Return correlation matrix, real U.S. assets 1945–2008, 161t
Return-to-risk ratio across economic cycle, 1900–2009, 163f
Return-to-risk ratio across economic cycle, equities and debt, 163f
Risk-management discipline, 168
Russian Federation, 5, 34–35, 277–279
SAA. See strategic asset allocation
SAFE. See China State Administration of Foreign Exchange
SAMA. See Saudi Arabian Monetary Agency
Santiago Principles, 37, 236, 271–272, 281–284
commercial behavior, 67b
fair competition in markets, 67b
financial market stability, 67b
governance, accountability, 66b, 82, 276–277
institutional framework, governance structure, 68–69
investment, risk management framework, 69–70
IWG and, 59, 63–64, 81
key features, 65–70, 66–67b
legal framework, 65, 67–68, 82–83
macroeconomic policies coordination, 65, 67–68
macroeconomic policy challenges, 66b
management of nation’s wealth, 66b
objectives, 65, 67–68
public policy concerns, 59
risk management, 82
voting rights, 83
Saudi Arabian Monetary Agency (SAMA), 7, 207
Savings funds, 46, 52, 60, 96, 137–142, 146
SDDS. See Special Data Dissemination Standard
Securities and Exchange Commission (SEC), 63
Shift from official reserves impact, 212–215
Sovereign assets and liabilities, 248–252
Sovereign financing, 148–149
Sovereign pension funds (SPFs), 134, 135t
Sovereign wealth funds (SWFs) absolute, relative size in context, 206–209
aims, strategies, 6–8, 8f
asset dependencies, 161–163
assets, 26–28, 126, 127f
assets, classes by volume, 27f
assets, conditional dependence, 162–163
assets, Dec ’07–Dec ’09, 145f
assets’ idiosyncratic risks, 159–160
assets, projected growth through 2020, 30f
assets, regional distribution, 26f
capital sources, risk tolerance, 129–131
classification implications, 137, 138–139t, 140
communication, post global financial crisis, 232–233
contingent pension reserve funds, 60
cost of risk, 159–160
cross-border flows, 86, 87–88t, 88–89
development funds, 46, 49, 60, 96
domestic financial crises and, 19–20
domestic statistics, 89–90
drawdown risk as function of past drawdown, 160f
emerging markets, 10–11, 215f
endowment funds vs., 151
estimated assets, 5f
estimated assets under management, end-2008, 190t
exchange rate issues, 22
external sector statistics and, 90–91
financial risk-return balance, 130f
financial utility function, mathematical translation, 159
fiscal policy, 20–21
global market impact, 61–62
governance, post global financial crisis, 230–231
governments role, 96
gross value of transactions, 194t
growth after 2002, 4
growth by 2015, 126
growth profile, returns vs. risk, 127–129, 128f
growth prospects, post 2008, 11
investment places, types, 210–212
investment processes, post global financial crisis, 231–232
investments, asset sales, 28f
investments value, by target sector, 214f
issues surrounding, 61–63
market impact, transparency, 217–218
market participants’ reaction, 215–217
monetary policy, 21–22
new funds, targeted goals, 11
nontraditional asset class diversification, 10
objectives, taxonomy, 60–61
observed asset allocations, comparison, 141–142, 143f, 144
policy changes ahead, 148–149
postcrisis SAA, 143f, 147f
primary sources of funds, 92f
projected 2013 assets, 12f
projections by region, 192f
publicly announced equity investments, market impact, 209–210
regulation, 95–96, 149
relative buy/hold returns, asset classes, 128f
reserve investment corporations, 60, 139t
return correlation matrix, real U.S. assets 1945–2008, 161t
returns, 2008, 144f
returns, 2009, 145f
return-to-risk ratio across economic cycle, 1900–2009, 163f
return-to-risk ratio across economic cycle, equities and debt, 163f
SAAs, funding source, 141
SAAs, investment horizon, 140–141
SAAs, theoretical considerations, 140–141
savings funds, 46, 52, 60, 96, 137, 138–139t, 140
shift from official reserves impact, 212–215
sources of funds, 4
sovereign financing, 148–149
stabilization funds, 6–7, 20–22, 52, 60, 96, 137, 138–139t, 140, 144
stakes in individual companies, 28, 29f
statistical reporting practices, 91–92
strategic shifts, post 2008, 9–11
strategic vs. financial utility, 157–158, 158f
talent hiring, 11
25:45:30 long-term model portfolio, 131–132
by type, percent share assets under management, 191f
utility function, 157–163
Special Data Dissemination Standard (SDDS), 87t
Stabilization funds, 6–7, 20–22, 52, 60, 96, 137, 138–139t, 140, 144
State Administration of Foreign Exchange, China, 6
State funding, 31–32
State Oil Fund, Azerbaijan, 47
Static vs. dynamic allocation, 163–165
Statistical reporting practices, 91–92
Strategic active investors, 8
Strategic asset allocation (SAA), 20, 52–53
funding source, 141
investment horizon, 140–141
theoretical considerations, 140–141
Strategic assets sale, know-how, 32–33
Strategic vs. financial utility, 157–158, 158f
Stylized portfolio analysis, 195–198, 197f
Tail event risk management, 169–170
Temasek Holdings, 5, 7
The Carlyle Group, 7
Transparency, 54–56, 61. See also investment flows, transparency
25:45:30 long-term model portfolio, 131–132
United States (U.S.)
Foreign Investment and National Security Act, 33
national policy responses, protectionism, 35
Value investing, 166–168
Yield-seeking, passive investors, 7–8