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date: 29 October 2020

Abstract and Keywords

This chapter discusses sovereign wealth fund (SWF) governance as a tool to manage domestic political risk. It adds to the literature on the domestic legitimacy of SWFs and theorizes that legitimacy, broadly conceived, serves as a signal of appropriate entity and political risk management. Sovereign fund legitimacy is a question of increasing importance to sponsor countries as decreasing oil and gas prices force some governments to decide whether the role of SWFs should be changed to deal with the loss of revenue resulting from decreased oil and gas exports, or other budget shocks. Policymakers and fund officials must structure and govern sovereign funds in such a way as to adequately and legitimately fulfill their mandate. Threats to legitimacy include issues involving ultimate ownership of the fund, corruption, unclear or shifting purposes and uses of the fund, and misalignment of the fund with societal mores and interests.

Keywords: sovereign wealth funds, sovereign development funds, political risk, governance, legitimacy, accountability, transparency

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