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Regulating Sovereign Wealth Funds to Avoid Investment Protectionism

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  • Georges Kratsas
  • Jon Truby

Abstract

Chinese and Emirati purchases of US companies have collapsed because of suspicions that their Sovereign Wealth Fund (SWF) status is a disguise for political ambitions. SWFs have grown in size and number, drawing the attention of many government officials because of their non-transparent nature and expansionary investment policies. Their government-controlled status and non-transparent nature have raised fears among governments of political rather than economic investment motivations. SWFs may use their economic influence to obtain critical information, transfer jobs abroad, or compromise the operation of strategically important companies. Such concerns have led to proposals for national measures to regulate investments of foreign SWFs with a view to controlling their economic and security impact. This article questions whether the existence of SWFs justifies the adoption a particular set of national or international foreign investment regulations. It offers an assessment of competing models from the viewpoint of theory, costs, and implementation. It also examines the alternative model of international self-regulation.

Suggested Citation

  • Georges Kratsas & Jon Truby, 2015. "Regulating Sovereign Wealth Funds to Avoid Investment Protectionism," Journal of Financial Regulation, Oxford University Press, vol. 1(1), pages 95-134.
    • Handle: RePEc:oup:refreg:v:1:y:2015:i:1:p:95-134.
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    File URL: http://hdl.handle.net/10.1093/jfr/fju002
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    Citations

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    Cited by:

    1. Jon Truby, 2020. "Governing Artificial Intelligence to benefit the UN Sustainable Development Goals," Sustainable Development, John Wiley & Sons, Ltd., vol. 28(4), pages 946-959, July.
    2. Bahoo, Salman & Alon, Ilan & Paltrinieri, Andrea, 2020. "Sovereign wealth funds: Past, present and future," International Review of Financial Analysis, Elsevier, vol. 67(C).
    3. Aggarwal, Raj & Goodell, John W., 2018. "Sovereign wealth fund governance and national culture," International Business Review, Elsevier, vol. 27(1), pages 78-92.
    4. Oliver McPherson‐Smith, 2021. "Diversification, Khashoggi, and Saudi Arabia’s Public Investment Fund," Global Policy, London School of Economics and Political Science, vol. 12(2), pages 190-203, April.
    5. Ciarlone, Alessio & Miceli, Valeria, 2016. "Escaping financial crises? Macro evidence from sovereign wealth funds' investment behaviour," Emerging Markets Review, Elsevier, vol. 27(C), pages 169-196.
    6. Hoda Youssef & Ibrahim Elbadawi & Raimundo Soto, 2018. "Sovereign Wealth Funds and Macroeconomic Stabilization in the Home Economy," Working Papers 1175, Economic Research Forum, revised 29 Mar 2008.
    7. Grira, Jocelyn, 2020. "Back to government ownership: The Sovereign Wealth Funds phenomenon," Finance Research Letters, Elsevier, vol. 34(C).
    8. Kamiński, Tomasz, 2017. "Sovereign Wealth Fund investments in Europe as an instrument of Chinese energy policy," Energy Policy, Elsevier, vol. 101(C), pages 733-739.

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