Reevaluating the Roles of Large Public Surpluses and Sovereign Wealth Funds in Asia
Lee, Bernard; Wang, Hefei | June 2011
Abstract
This paper discusses the increasingly important roles of Asian official institutions in the new global financial landscape and the reasons that have led to the build-up of massive public surpluses. We re-examine the role of sovereign wealth funds (SWFs) as the de facto "global lender of last resort" during the recent financial crisis. Specifically, we analyze SWFs’ balance sheet characteristics, target allocations strategies, strategic agendas and political realities, management philosophies, and other real-world challenges, both before and after the crisis. Part of our analysis incorporates data which includes announced deals, regulatory filings, balance sheet information, and actual performance data made available by specific SWFs. We also point out a logical inconsistency in the common application of the Berk-Green alpha argument to the management of SWFs. For instance, the recent work done by Ang, Goetzmann, and Schaefer (2009) suggests limited or no evidence that alpha-seeking activities have impacts on SWF performance. We argue that the problem may be partially due to the choice of an appropriate performance benchmark for such large, non-commercial mandates. Finally, we propose a set of principles to construct a fair performance benchmark for SWFs.
Citation
Lee, Bernard; Wang, Hefei. 2011. Reevaluating the Roles of Large Public Surpluses and Sovereign Wealth Funds in Asia. © Asian Development Bank. http://hdl.handle.net/11540/3875. License: CC BY 3.0 IGO.Keywords
Trade Finance
Rural Finance
Regional Development Finance
Public Financial Management
Public Finance
International Finance
Intergovernmental Finance
Financial System
Financial Flows
Financial Assets
Finance And Trade
Trade Finance
Local Finance
International Monetary Relations
Local Finance
Banks
Capital Market
financial statistics
Foreign trade
Municipal government
Metropolitan government
International banks and banking
Capital movements
Central banks and banking
Bills of exchange
Swaps
Banks and banking
Stock exchanges
Market
Exchange
Balance of trade
Show allCollapse