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Regulating sovereign wealth funds operating overseas through an external fund manager

Author

Listed:
  • André de Palma

    (ENS Cachan - École normale supérieure - Cachan, X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

  • Luc Leruth

    (IMF Office in Europe - EUO)

  • Adnan Mazarei

    (Middle East and Central Asia Department of the IMF - IMF)

Abstract

This article looks at the relationship between SWFs and their recipient countries, with a focus on the impact it may have depending on the nature of the objectives pursued by the SWF from the perspective of a principal-agent framework. In particular, when the SWF has multiple objectives, there is a risk that signals are misinterpreted and lead to misguided reactions by authorities in the recipient country. Thus, hard to interpret signals do not provide a sufficient case for imposing constraints on the SWF. However, we will show that requiring the SWF to invest through intermediary asset managers may foster cooperation, especially when the objectives of the SWF and of the authorities are closely aligned. SWFs may also alleviate the concerns in recipient countries by acting as an investor (and accepting the funds) of other SWF and non-SWF investors.

Suggested Citation

  • André de Palma & Luc Leruth & Adnan Mazarei, 2010. "Regulating sovereign wealth funds operating overseas through an external fund manager," Working Papers hal-00488662, HAL.
    • Handle: RePEc:hal:wpaper:hal-00488662
    Note: View the original document on HAL open archive server: https://hal.science/hal-00488662
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    References listed on IDEAS

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