Sovereign investors have assumed an increasingly influential position in international financial markets. In times of unprecedented upheaval in Western financial markets, sovereign wealth funds and other official investors from emerging markets have emerged as potential stabilising forces.

Yet, significant challenges and policy hurdles – both domestically and internally – remain in the process of carving out an optimal role for sovereign investors in global financial markets and enabling their funds to reach their full potential.

New Perspectives on Sovereign Asset Management provides a unique guide to the policy questions surrounding the emergence of sovereign investors. The book presents the perspectives of seasoned policymakers, politicians, academics, analysts – and most significantly, experienced official investors. Readers will be able to draw on the expert analysis of this world-class team of authors in four key areas:

• The role of sovereign investors in 21st century financial markets: what are the appropriate objectives for sovereign investment? What role can they play in the emerging financial and economic landscape? How has the credit crunch affect the position of these powerful actors?
  
  
• The regulatory approach to sovereign investment:  recipient countries have identified a number of concerns over the rising influence of government-controlled investment. The book provides first-hand accounts of the evolving regulatory system and unique perspectives on the regulatory priorities
  
  
• The internal challenges of sovereign investors: alongside the debate of the role of sovereign funds in global financial markets, rapid changes are taking place in terms of the funds’ asset and currency allocations, governance models, and operational structures and procedures. Drawing on the insights of experienced official investors and experts who are actively engaged with sovereign funds, the book provides an overview of these changes and the lessons that can be drawn from them.
  
  
• The future of sovereign investing: concerns over a regulatory backlash against sovereign funds and the landscape-altering financial turmoil of 2007 and 2008 present an ideal opportunity to assess what the future will hold for sovereign investors: will they seek to diversify their portfolios to encompass emerging markets? What is the appropriate role of sovereign investment in promoting domestic (and regional) economic development? Should a growing number of countries look to establish funds to management excess savings and resource windfalls?

Leading authorities

The book draws on the insights of a world-class set of authors, drawn from a wide range of backgrounds, including Jennifer Johnson-Calari (World Bank), Jagdish Bhagwati (Columbia University), Sir John Gieve (Bank of England), Linah Mohohlo (Bank of Botswana), Udaibir Das (International Monetary Fund), Javier Santiso (OECD), Shahmar Movsumov (State Oil Fund of Azerbaijan) and Jim Moran (US Congress).

Key policy questions

The book tackles the policy questions raised by and facing sovereing wealth funds, at this time of financial market turmoil, head on:

• How will sovereign wealth funds react to fears of a regulatory backlash from the West?
  
• Will the credit crunch trigger a major rethink by sovereign wealth funds?
  
• How are sovereign investors repositioning their portfolios?
  
• What are the domestic and internal constraints on sovereign wealth funds?
  
• How are sovereign funds organised and managed?
  
• Are sovereign wealth funds turning more towards emerging markets?
• How is the relationship between sovereign funds and external managers changing?
  
  

Testimony

“Worries about the impact of sovereign wealth funds on global financial stability were swept away by the collapse of multiple Western financial institutions under the weight of excess leverage. Indeed, sovereign wealth funds emerged as potential white knights – unleveraged, long-term investors who are able to ignore short-term volatility for long-term gains. Strong hands while the weak capitulated.”

“This book offers invaluable insights into the various policy questions raised by the heightened importance of sovereign investors. New Perspectives on Sovereign Asset Management also offers perspectives on the practical issues of investment policy, operations and institutional development that confront sovereign asset managers on a day-to-day basis. The collection of essays gathered here provides a unique analysis of the dynamics driving sovereign investors’ policies and strategies and how they are likely to influence global investment flows.”

Jennifer Johnson-Calari
Director, Sovereign Investment Partnerships, World Bank Treasury.

Foreword
Jennifer Johnson-Calari
Director, Sovereign Investment Partnership, World Bank Treasury

Three things we have learned about sovereign investors
Malan Rietveld
Central Banking Publications

Sovereign wealth funds and global imbalances
Sir John Gieve
Deputy Governor, Bank of England

Sovereign wealth funds: implications for policy
Jagdish Bhagwati
Professor of Economics, Columbia University

Sovereign wealth funds and the United States Congress
Martin Weiss
Analyst, Congressional Research Service

The European Union’s common approach to sovereign wealth funds
John Berrigan, Moreno Bertoldi and Chris Bosma
Directorate General for Economic and Financial Affairs European Commission

Interview: Jim Moran
Chairman, Task Force on Sovereign Wealth Funds, United States Congress

Structuring a natural resource fund: the case of Azerbaijan
Shahmar Movsumov
Executive Director, State Oil Fund of Azerbaijan

Selecting and managing external fund managers
Linah K. Mohohlo
Head, Pula Fund and Governor, Bank of Botswana 

The changing framework for sovereign wealth management in Russia
Roman S. Shiyko
Head of Fund Management, Ministry of Finance, Russian Federation

China’s sovereign wealth fund: challenges and weaknesses
He Fan and Zhang Ming
Chinese Academy of Social Science

Is there a legal framework for sovereign investors?
Charles Proctor
Partner, Bird and Bird

Sovereign funds: the Chilean experience
Eric Parrado
International Finance Coordinator, Ministry of Finance, Republic of Chile

Proactive management of sovereign assets and liabilities: the case of Colombia and Peru
Ana Maria Carrasquilla and Carlos Giraldo
Fondo Latinoamericano de Reservas (FLAR)

Managing foreign-exchange risk in sovereign portfolios: the case for equities
Roberto de Beaufort, Arjan Berkelaar and Gabriel Petre
World Bank Treasury

New tools for evaluating the activeness of sovereign equity portfolios
Mustafa Sagun and Scott P. Leiberton
Principal Investors Group

Sovereign development funds: financial actors in the shifting wealth of nations
Javier Santiso
Director, OECD Development Centre

Harnessing sovereign wealth for future prosperity
Udaibir Das
Division Chief, Sovereign Asset and Liability Management Division, International Monetary Fund

Reconsidering risk in the wake of the financial market crisis: lessons and challenges
Thomas J. Jordan
Member of the Governing Board, Swiss National Bank

Two suggestions on the role of sovereign investors in the global economy
Cynthia Lummis
Former State Treasurer of Wyoming

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Leading authorities

Key policy questions

Testimony

Contents

Foreword