Sovereign Wealth Funds and Long-Term Development Finance: Risks and Opportunities

Gelb, Alan; Tordo, Silvana; Halland, Håvard; Arfaa, Noora; Smith, Gregory

doi:10.1596/1813-9450-6776

Cited by 65 publications

(29 citation statements)

References 17 publications

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“…In addition, depending on the structure of the model and its calibration, there may also be a trade-off between the volatility measures that are accounted for in the social loss 55 Note also that there is an ongoing debate regarding whether sovereign wealth funds should finance domestic projects (especially in infrastructure) directly, just like development banks. This raises, however, a host of issues; see Gelb et al (2014) for a discussion.…”

Section: Discussionmentioning

confidence: 99%

Optimal fiscal management of commodity price shocks

Agénor

2016

Journal of Development Economics

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A dynamic stochastic general equilibrium model is used to study the optimal fiscal response to commodity price shocks in a small open low-income country. The model accounts for imperfect access to world capital markets and a variety of externalities associated with public infrastructure, including utility benefits, a direct complementarity effect with private investment, and reduced distribution costs. However, public capital is also subject to congestion and absorption constraints, with the latter affecting the efficiency of infrastructure investment. The model is parameterized and used to examine the transmission process of a temporary resource price shock under a benchmark case (cash transfers) and alternative fiscal rules, involving either higher public spending or accumulation in a sovereign fund. The optimal allocation rule between spending today and asset accumulation is determined so as to minimize a social loss function defined in terms of the volatility, relative to the benchmark case, of private consumption and either the nonresource primary fiscal balance or a more general index of macroeconomic stability, which accounts for the volatility of the real exchange rate. Sensitivity analysis is conducted with respect to various structural parameters and model specification.

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Section: Discussionmentioning

confidence: 99%

Optimal fiscal management of commodity price shocks

Agénor

2016

Journal of Development Economics

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“…SWFs have very diverse sources of funds (e.g., commodities), investment objectives (e.g., stabilization and pensions), and investment policies (ranging from risk-return criteria to economic and political influence) (Gelb et al 2014).…”

Section: Sovereign Wealth Fundsmentioning

confidence: 99%

Infrastructure Investment, Private Finance, and Institutional Investors: Asia from a Global Perspective

Inderst

2016

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. Email: georg@georginderst.com Georg Inderst is an independent adviser at Inderst Advisory in London, United Kingdom.The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Working papers are subject to formal revision and correction before they are finalized and considered published.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan AbstractThis study evaluates infrastructure investment and finance in Asia from a global perspective. It provides an overview on infrastructure needs and the various sources of private finance, globally and within Asia, and creates a "bigger picture" for the demand and supply of capital for infrastructure by using a simple framework, i.e., percentages of gross domestic product.The picture is expectedly not uniform across Asia, but some interesting features emerge from global comparisons. Overall, the private sector still plays a relatively subdued role. Bank loans dominate private infrastructure finance, and there is much scope for the further development of capital markets. The volumes of listed and unlisted investment instruments, of project finance and of public-private partnerships, are still small in relation to investment needs and well below the global average. However, there are some notable exceptions.Institutional investors are widely seen as a new financing source for infrastructure. There are some distinctive features in Asia, such as the prominence of large pension reserve funds and sovereign wealth funds, and comparatively weak private long-term savings institutions. The current asset allocation to infrastructure by domestic inve...

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“…Two more studies describe the optimal investment policy followed by Norway's Government Pension Fund Global (GPFG) and assess whether the fund's actual asset allocations are consistent with the optimal design (Ang et al, 2009;Chambers et al, 2012). Finally, three studies present, first, a policy-oriented description of the "benchmarks" governments should take into account when establishing a SWF (Ang, 2010); second, an assessment of whether SWFs are and should be domestic "investors of last resort" (Raymond, 2012); and, third, a discussion of whether SWFs should promote domestic economic development by financing infrastructure investments in developing countries (Gelb et al, 2014).…”

Section: Normative Assessments Of How Swfs Should Investmentioning

confidence: 99%

Rise of the Fiduciary State: A Survey of Sovereign Wealth Fund Research

Megginson

Fotak

2015

Journal of Economic Surveys

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We survey the literature documenting the rise of sovereign wealth funds (SWFs), which, with assets under management of over $5.4 trillion at year‐end 2014, are a major force in global finance. Research papers have analyzed the evolution of SWFs from stabilization funds to stand‐alone wealth management funds; we both survey this research and show that more than 25 countries have launched or proposed new SWFs since January 2008. The most salient and controversial feature of SWFs is that they are state‐owned; we survey the existing literature on state ownership and discuss what this predicts about the efficiency and beneficence of government control of SWF assets. We discuss the documented importance of SWF funding sources (oil sales revenues versus excess reserves from export earnings) and survey the normative literature describing how SWFs should allocate funds. We then summarize the empirical literature studying how SWFs actually do allocate funds—across asset classes, geographically, and across industries. We document that most SWF equity investments in publicly traded firms involve cross‐border purchases of sizeable minority stakes (median around 20%) in target firms, with a strong preference for investments in the financial sector. Next, we assess empirical studies examining the impact of SWF stock investments on target firm financial and operating performance, and find universal support for a positive announcement period stock price increase of 1–3%. This, however, is significantly lower than the 5% abnormal return documented for stock purchases by comparable privately owned financial investors in recent studies, indicating a “sovereign wealth fund discount.” We conclude by summarizing the lessons of SWF research and pointing out unresolved issues.

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Sovereign Wealth Funds and Long-Term Development Finance: Risks and Opportunities

Cited by 65 publications

References 17 publications

Optimal fiscal management of commodity price shocks

Optimal fiscal management of commodity price shocks

Infrastructure Investment, Private Finance, and Institutional Investors: Asia from a Global Perspective

Rise of the Fiduciary State: A Survey of Sovereign Wealth Fund Research

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