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Gurneeta Vasudeva - One of the best experts on this subject based on the ideXlab platform.

Lilac Nachum - One of the best experts on this subject based on the ideXlab platform.

William L Megginson - One of the best experts on this subject based on the ideXlab platform.

  • the Sovereign Wealth Fund discount evidence from public equity investments
    Review of Financial Studies, 2015
    Co-Authors: Bernardo Bortolotti, Veljko Fotak, William L Megginson
    Abstract:

    We document that announcement-period abnormal returns of Sovereign Wealth Fund (SWF) equity investments in publicly traded firms are positive but lower than those of comparable private investments. Further, SWF investment targets suffer from declining return on assets and sales growth over the following three years. Our results are robust to controls for target and deal characteristics and are not driven by SWF target selection criteria. Larger discounts are associated with SWFs taking seats on boards of directors and with SWFs under strict government control acquiring greater stakes, supporting the hypothesis that political influence negatively affects firm value and performance.

  • rise of the fiduciary state a survey of Sovereign Wealth Fund research
    Journal of Economic Surveys, 2014
    Co-Authors: William L Megginson, Veljko Fotak
    Abstract:

    We survey the literature documenting the rise of Sovereign Wealth Funds (SWFs), which, with assets under management of over $5.4 trillion at year-end 2014, are a major force in global finance. Research papers have analyzed the evolution of SWFs from stabilization Funds to stand-alone Wealth management Funds; we both survey this research and show that more than 25 countries have launched or proposed new SWFs since January 2008. The most salient and controversial feature of SWFs is that they are state-owned; we survey the existing literature on state ownership and discuss what this predicts about the efficiency and beneficence of government control of SWF assets. We discuss the documented importance of SWF Funding sources (oil sales revenues versus excess reserves from export earnings) and survey the normative literature describing how SWFs should allocate Funds. We then summarize the empirical literature studying how SWFs actually do allocate Funds—across asset classes, geographically, and across industries. We document that most SWF equity investments in publicly traded firms involve cross-border purchases of sizeable minority stakes (median around 20%) in target firms, with a strong preference for investments in the financial sector. Next, we assess empirical studies examining the impact of SWF stock investments on target firm financial and operating performance, and find universal support for a positive announcement period stock price increase of 1–3%. This, however, is significantly lower than the 5% abnormal return documented for stock purchases by comparable privately owned financial investors in recent studies, indicating a “Sovereign Wealth Fund discount.” We conclude by summarizing the lessons of SWF research and pointing out unresolved issues.

  • A Collection of Reviews on Savings and Wealth Accumulation - Rise of the Fiduciary State: A Survey of Sovereign Wealth Fund Research
    Journal of Economic Surveys, 2014
    Co-Authors: William L Megginson, Veljko Fotak
    Abstract:

    We survey the literature documenting the rise of Sovereign Wealth Funds (SWFs), which, with assets under management of over $5.4 trillion at year-end 2014, are a major force in global finance. Research papers have analyzed the evolution of SWFs from stabilization Funds to stand-alone Wealth management Funds; we both survey this research and show that more than 25 countries have launched or proposed new SWFs since January 2008. The most salient and controversial feature of SWFs is that they are state-owned; we survey the existing literature on state ownership and discuss what this predicts about the efficiency and beneficence of government control of SWF assets. We discuss the documented importance of SWF Funding sources (oil sales revenues versus excess reserves from export earnings) and survey the normative literature describing how SWFs should allocate Funds. We then summarize the empirical literature studying how SWFs actually do allocate Funds—across asset classes, geographically, and across industries. We document that most SWF equity investments in publicly traded firms involve cross-border purchases of sizeable minority stakes (median around 20%) in target firms, with a strong preference for investments in the financial sector. Next, we assess empirical studies examining the impact of SWF stock investments on target firm financial and operating performance, and find universal support for a positive announcement period stock price increase of 1–3%. This, however, is significantly lower than the 5% abnormal return documented for stock purchases by comparable privately owned financial investors in recent studies, indicating a “Sovereign Wealth Fund discount.” We conclude by summarizing the lessons of SWF research and pointing out unresolved issues.

  • determinants of Sovereign Wealth Fund cross border investments
    The Financial Review, 2013
    Co-Authors: William L Megginson
    Abstract:

    Using a sample of 1,590 purchases of stock by Sovereign Wealth Funds (SWFs) in listed firms in 78 target countries between 1985 and 2011, we study the country-level determinants of SWF cross-border investment. We find that SWFs from countries with high levels of openness and economic development, but with less developed local capital markets, will make more cross-country transactions, while target countries with higher levels of investor protection and more developed capital markets will attract more SWF investment. Our findings support the investment facilitation hypothesis, suggesting that SWFs act purely or principally as commercial investors facilitating cross-border corporate investment.

  • Sovereign Wealth Fund investment patterns and performance
    2010
    Co-Authors: Bernardo Bortolotti, Veljko Fotak, William L Megginson, William F Miracky
    Abstract:

    This study describes the newly created Monitor-FEEM Sovereign Wealth Fund Database and discusses the investment patterns and performance of 1,216 individual investments, worth over $357 billion, made by 35 Sovereign Wealth Funds (SWFs) between January 1986 and September 2008. Approximately half of the investments we document occur after June 2005, reflecting a recent surge of SWF activity. We document large SWF investments in listed and unlisted equity, real estate, and private equity Funds, with the bulk of investments being targeted in cross-border acquisitions of sizeable but non-controlling stakes in operating companies and commercial properties. The average (median) SWF investment is a $441 million ($55 million) acquisition of a 42.3% (26.2%) stake in an unlisted company; the most active SWFs originate from Singapore or the United Arab Emirates. Almost one-third (30.9%) of the number, and over half of the value (54.6%) of SWF investments are directed toward financial firms. The vast majority of SWF investments involve privately-negotiated purchases of ownership stakes in underperforming firms. We perform event study analysis using a sample of 235 SWF acquisitions of equity stakes in publicly traded companies around the world, and document a significantly positive mean abnormal return of about 0.9% around the announcement date. However, one-year matched-firm abnormal returns of SWFs average -15.49%, suggesting equity acquisitions by SWFs are followed by deteriorating firm performance. In cross sectional analysis, we find weak evidence of benefits associated with a monitoring role of SWFs and evidence consistent with agency costs created by conflicts of interest between SWFs and minority shareholder. SWFs have collectively lost over $57billion on their holdings of listed stock investments alone through March 2009.

Nathan Mauck - One of the best experts on this subject based on the ideXlab platform.

  • Are Government Owned Investment Funds Created Equal? Evidence from Sovereign Wealth Fund Real Estate Acquisitions
    The Journal of Real Estate Finance and Economics, 2019
    Co-Authors: Nathan Mauck, S. Mckay Price
    Abstract:

    Sovereign Wealth Funds (SWFs) are an institutional investor class about which relatively little is known. Even though they have trillions of dollars in assets under management, their (typically) highly secretive nature renders them difficult to analyze in an academic context. We utilize transactional data from the Sovereign Wealth Fund Institute to provide the first academic analysis of SWF real estate investment activity of which we are aware. To better understand this growing investor class, we compare SWFs with their most closely related institutional group, public pension Funds (PPFs). While both SWFs and PPFs are state owned investment Funds, we find SWFs have lower Stone and Truman ( 2016 ) best practice scores (based on Fund structure, governance, transparency and accountability, and behavior.) Further, while both SWFs and PPFs show increasing levels of cross-border real estate investment, SWFs are significantly more likely than PPFs to invest across international borders. We find the percentage of SWF cross-border real estate investment to be substantially higher than the percentage of SWF cross-border investment in public and private equity documented in other studies. Moreover, in a subsample of acquisitions in the U.S., cross-border real estate investments are in locations with lower capitalization rates than domestic acquisitions for both SWFs and PPFs, and there is no discernable difference in rates across the two Fund types, on average.

  • Sovereign Wealth Fund Investment and Firm Volatility
    Oxford Handbooks Online, 2017
    Co-Authors: April M Knill, Nathan Mauck
    Abstract:

    The popular press and politicians have expressed concerns regarding the potential destabilizing force of Sovereign Wealth Funds (SWFs). This chapter addresses these concerns by presenting results from the literature on the volatility and compensation of risk of SWF target firms and target markets. SWF investments (sales) are associated with a reduction (increase) in the compensation of risk for a three-year (five-year) term. Firm volatility decomposition suggests that it is mainly idiosyncratic risk that drives these impacts. The chapter reviews evidence and data that show the relationship between SWF investment and firm volatility depends on the investment horizon examined. It explains that the evidence is consistent with the view that the relationship between SWF investment and firm volatility is mainly attributable to idiosyncratic risk.

  • Sovereign Wealth Fund investment and the return to risk performance of target firms
    Journal of Financial Intermediation, 2012
    Co-Authors: April M Knill, Nathan Mauck
    Abstract:

    This paper investigates the relationship between Sovereign Wealth Fund (SWF) investment and the return-to-risk performance of target firms. Specifically, we find that target firm raw returns decline following SWF investment. Though risk also declines following SWF investment, we find that SWF investment is associated with a reduction in the compensation of risk over the 5years following acquisition. Firm volatility decomposition suggests that idiosyncratic risk is what mainly drives these impacts toward decline. Employing a multinomial logit framework wherein combinations of target returns and risk movements are categorized, we see that, in cases of foreign investment, SWFs’ target firm performance most closely resembles that of other government-owned firms. The observed results are inconsistent with predictions of higher volatility and improved returns due to monitoring firm activities from the institutional investor literature. This suggests that SWFs may not provide some of the benefits that are offered by other institutional investors.

  • bilateral political relations and Sovereign Wealth Fund investment
    Journal of Corporate Finance, 2012
    Co-Authors: April M Knill, Nathan Mauck
    Abstract:

    We examine the role of bilateral political relations in Sovereign Wealth Fund (SWF) investment decisions. Our empirical results suggest that political relations play a role in SWF decision making. Contrary to predictions based on the FDI and political relations literature, we find that relative to nations in which they do not invest, SWFs prefer to invest in nations with which they have weaker political relations. Using a two-stage Cragg model, we find that political relations are an important factor in where SWFs invest but matter less in determining how much to invest. Inconsistent with the FDI and political relations literature, these results suggest that SWFs behave differently than rational investors who maximize return while minimizing risk. Consistent with the trade and political relations literature, we find that SWF investment has a positive (negative) impact for relatively closed (open) countries. Our results suggest that SWFs use—at least partially—non-financial motives in investment decisions.

  • bilateral political relations and the impact of Sovereign Wealth Fund investment
    2011
    Co-Authors: April M Knill, Nathan Mauck
    Abstract:

    We examine the role of bilateral political relations in Sovereign Wealth Fund (SWF) investment decisions. Our empirical results suggest that political relations play a role in SWF decision making. Contrary to predictions based on the FDI and political relations literature, we find that relative to nations in which they do not invest, SWFs prefer to invest in nations with which they have weaker political relations. Using a two-stage Cragg model, we find that political relations are an important factor in why SWFs invest but matter less in determining how much to invest. These results suggest that SWFs behave differently than other economic agents. Consistent with the FDI and political relations literature, we find that SWF investment has a positive (negative) impact for relatively closed (open) countries. Our results suggest that SWFs use - at least partially - non-financial motives in investment decisions.

Adedoyin Jolade Omede - One of the best experts on this subject based on the ideXlab platform.

  • Sovereign Wealth Fund and fiscal federalism in nigeria 2011 14 an assessment of contending issues
    Regional & Federal Studies, 2017
    Co-Authors: Lere Amusan, Luqman Saka, Adedoyin Jolade Omede
    Abstract:

    ABSTRACTAfter more than half a century as a leading oil-producing nation in Africa, Nigeria followed the footsteps of most natural resources rich countries (particularly crude-oil) by establishing the Sovereign Wealth Fund (SWF). SWF is a large pool of state-owned investment Fund composed of diverse financial instruments, invested in whole or in part, outside home countries. Since 2004, ‘Special Funds’, of which SWF is part, have become issues of serious contention between the Federal and state governments in Nigeria. On 22 May 2011, the 36 state Governors approached the Nigerian Supreme Court, requesting the Court to use its judicial powers to squash plans by the Federal Government of Nigeria to withdraw $1 billion from the Excess Crude Account to float the planned SWF. The bone of contention surrounds issues of constitutionality, ownership and prudency in the management of the Fund. Relying on extant literature, Acts of Parliament as well as commentaries, opinion pieces, editorials and news articles fro...

  • Sovereign Wealth Fund and fiscal federalism in Nigeria (2011–14): An assessment of contending issues
    Regional & Federal Studies, 2017
    Co-Authors: Lere Amusan, Luqman Saka, Adedoyin Jolade Omede
    Abstract:

    ABSTRACTAfter more than half a century as a leading oil-producing nation in Africa, Nigeria followed the footsteps of most natural resources rich countries (particularly crude-oil) by establishing the Sovereign Wealth Fund (SWF). SWF is a large pool of state-owned investment Fund composed of diverse financial instruments, invested in whole or in part, outside home countries. Since 2004, ‘Special Funds’, of which SWF is part, have become issues of serious contention between the Federal and state governments in Nigeria. On 22 May 2011, the 36 state Governors approached the Nigerian Supreme Court, requesting the Court to use its judicial powers to squash plans by the Federal Government of Nigeria to withdraw $1 billion from the Excess Crude Account to float the planned SWF. The bone of contention surrounds issues of constitutionality, ownership and prudency in the management of the Fund. Relying on extant literature, Acts of Parliament as well as commentaries, opinion pieces, editorials and news articles fro...

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