SOVEREIGN WEALTH FUND PORTFOLIOS

Alexander Dyck,
University of Toronto, Rotman School of Management
Adair Morse*
University of Chicago, Booth School of Business

ABSTRACT
Using a novel, hand-collected dataset of Sovereign Wealth Fund (SWF) investments in public
equities, private firms, and real estate, we establish what SWF portfolios look like. SWF
allocations are balanced across risky asset classes, very home-region biased, and very biased
toward certain industries, in particular, toward finance (owning 4.8% of world equity) and
transportation, energy and telecommunication. SWFs invest actively (with control rights) in both
public and private sectors, but mainly in these industries in their home regions. We use these
allocations to understand better the objectives that drive SWF investment decisions. We find
evidence for financial portfolio investor benchmarking and for hedging of income covariance
risk. We introduce and test an industrial planning hypothesis as an alternative objective and find
this has considerable explanatory power. We find that both measures to capture financial
portfolio and industrial planning objectives together explain 14.4% of SWF portfolio variation.
Of this, industrial planning accounts for 45%. There is significant variation in the power of
industrial planning objectives across SWFs revealing important heterogeneity in this investor
class. Industrial planning helps to explain active ownership, predicting higher ownership stakes.bruary, 2011

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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....