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date: 20 October 2019

Abstract and Keywords

This chapter introduces the 35 funds that meet the authors’ definition of SWFs, discusses their evolution from stabilization funds to SWFs and illustrates the differences and similarities between the various types of funds. The authors discuss the documented importance of SWF funding sources and survey the normative literature describing how SWFs should allocate funds. They then summarize the empirical literature studying how SWFs actually do allocate funds across asset classes, geographically, and across industries. An assessment of empirical studies examines the impact of SWF stock investments on target firm financial and operating performance, and finds universal support for a positive announcement period stock price increase. Finally, the authors point out the unresolved issues and possible extensions in SWF research, and assess how the massive decline in oil export revenues by major SWF sponsor nations such as Abu Dhabi, Russia, Kuwait, and Norway is likely to impact SWF investment levels in coming years.

Keywords: sovereign wealth funds, state capitalism, international financial markets, asset allocation, politics

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