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Published in:
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2010 | OriginalPaper | Chapter

Investment Strategy of Sovereign Wealth Funds

Author : Trond Døskeland

Published in: Energy, Natural Resources and Environmental Economics

Publisher: Springer Berlin Heidelberg

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Abstract

Sovereign wealth funds (SWF) are a new name for assets held by governments in another country’s currency. These funds are growing at an unprecedented rate and are becoming important players in global financial markets. In this paper, I describe how these funds are being invested and I develop a classification of investment options available for sovereign wealth funds.

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next chapter Chasing Reserves: Incentives and Ownership
Footnotes
1
The balance of trade is the difference between a nation’s imports and exports. The balance of trade forms part of the current account, which also includes income from the international investment position as well as international aid. If a government is going to accumulate assets in its Sovereign Wealth Fund, the government should also run a surplus on the government budget. However, there is a high correlation between trade surplus and government budget surplus.
 
2
A SWF or risk management funds are not the only way a country can hold money. A country can also hold/own public pension funds, and state-owned enterprises. Public pension funds hold the funds that states promise their citizens. These funds have traditionally kept low exposure to foreign assets. State-owned enterprises are companies fully or partly managed by the state, each of which may have its own assets and investments.
 
Literature
Bodie, Z. (1976). Common stocks as a hedge against inflation. Journal of Finance, 31, 459–470.CrossRef
Døskeland, T. M. (2007). Strategic asset allocation for a country: the Norwegian case. Financial Markets and Portfolio Management, 21(2), 167–201.CrossRef
IMF (2007). Global financial stability report. World economic and financial surveys, October. Washington, DC: International Monetary Fund.
IMF (2008). Global Financial Stability Report. World Economic and Financial Surveys, April. Washington, DC: International Monetary Fund.
Markowitz, H. (1952). Portfolio selection. Journal of Finance, 7(1), 77–91.
Metadata
Title
Investment Strategy of Sovereign Wealth Funds
Author
Trond Døskeland
Copyright Year
2010
Publisher
Springer Berlin Heidelberg
Book
Energy, Natural Resources and Environmental Economics

Print ISBN: 978-3-642-12066-4

Electronic ISBN: 978-3-642-12067-1

Copyright Year: 2010

DOI
https://doi.org/10.1007/978-3-642-12067-1_1