OCCASIONAL PAPER SERIES
NO 91 / JULY 2008
by Roland Beck and Michael Fidora 
THE IMPACT OF SOVEREIGN WEALTH FUNDS ON GLOBAL  FINANCIAL MARKETS

ABSTRACT
This paper analyses the impact of sovereign 
wealth funds (SWFs) on global fi nancial markets. 
It presents back-of-the-envelope calculations 
which simulate the potential impact of a transfer 
of traditional foreign exchange reserves to SWFs 
on global capital fl ows. If SWFs behave as 
CAPM-type investors and thus allocate foreign 
assets according to market capitalisation rather 
than liquidity considerations, offi cial portfolios 
reduce their “bias” towards the major reserve 
currencies. As a result, more capital fl ows 
“downhill” from rich to less wealthy economies, 
in line with standard neoclassical predictions. 
More specifi cally, it is found that under the 
assumption of SWFs investing according to 
market capitalisation weights, the euro area and 
the United States could be subject to net capital 
outfl ows while Japan and the emerging markets 
would attract net capital infl ows. It is also shown 
that these fi ndings are sensitive to alternative 
assumptions for the portfolio objectives of 
SWFs. Finally, the paper discusses whether a 
change in net capital fl ows triggered by SWFs 
could have an impact on stock prices and bond 
yields. Based on an event study approach, no 
evidence can be found for a stock price impact 
of non-commercially motivated stock sales by 
Norway’s Government Pension Fund.

Norway’s Government Pension Fund 
and Challenges of Capital Flows 
International Forum of Sovereign Wealth Funds 
3 October 2013

Yngve Slyngstad, Chief Executive Officer

Active ownership focus areas

Financial investor

Minority shareholder

Long-term horizon

Principle based 

Environmental and social risks:
 
Children’s rights

 Climate change

Water management

Markets:
Well-functioning financial markets
 Corporate governance:
Equal treatment of shareholders

Shareholder influence and board 
accountability

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This BLOG  looks at pensions and their impact on what are called Public Private Partnerships or P3’s these are not really about private funding at all but about two streams of public funding, pensions and government with private capital a third partner.
We will also deal with other pension matters, such as Defined Contribution Plans (DC) vs Defined Benefit (DB) PLANS, the weakness in private plans, the need for pension reform in public pensions to have shareholder rights, directorships and ethical investment directives and policies. 
Finally taking the long view we will show how these funds are forms of evolving social capital that is dominating private capital as we evolve into socialization of capital. 
Click HERE to read more....