Show Summary Details

Page of

PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice).

date: 14 November 2019

Abstract and Keywords

The article aims to discuss the optimal asset allocation for sovereign wealth funds (SWF). The main purpose of a commodity based sovereign wealth fund is to create a permanent income stream out of a temporary one and so allow consumption smoothing over time. The asset allocation framework typically consists of an objective function that implies a preference for the highest return for a given level of risk. The ultimate objective of a SWF is to smooth consumption and achieve intergenerational transfers. The accumulation of financial assets presupposes functioning markets for consumption goods such as food products. Another consideration that may guide the investment behavior of sovereign wealth funds and that highlights the role of liabilities is food security. Future food imports are a key component of the balance of payments identity. A rigorous analysis of the commodity fund's optimal asset allocation policy must take into account the role of liabilities and therefore requires an analysis of the country's balance of payments. The ALM takes into account the role of liabilities and the resulting additional hedging demands. The asset liability management (ALM) examines both assets and financial liabilities and models the return on assets and the return on liabilities.

Keywords: asset liability management, permanent income, financial liabilities, sovereign wealth funds

Access to the complete content on Oxford Handbooks Online requires a subscription or purchase. Public users are able to search the site and view the abstracts and keywords for each book and chapter without a subscription.

Please subscribe or login to access full text content.

If you have purchased a print title that contains an access token, please see the token for information about how to register your code.

For questions on access or troubleshooting, please check our FAQs, and if you can''t find the answer there, please contact us.