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The Investment Strategies of Sovereign Wealth Funds

Author

Listed:
  • Josh Lerner

    (Harvard Business School)

  • Shai Bernstein

    (Harvard University)

  • Antoinette Schoar

    (Harvard University)

Abstract

This paper examines the direct private equity investment strategies across sovereign wealth funds and their relationship to the funds’ organizational structures. SWFs seem to engage in a form of trend chasing, since they are more likely to invest at home when domestic equity prices are higher, and invest abroad when foreign prices are higher. Funds see the industry P/E ratios of their home investments drop in the year after the investment, while they have a positive change in the year after their investments abroad. SWFs where politicians are involved have a much greater likelihood of investing at home than those where external managers are involved. At the same time, SWFs with external managers tend to invest in lower P/E industries, which see an increase in the P/E ratios in the year after the investment. By way of contrast, funds with politicians involved invest in higher P/E industries, which have a negative valuation change in the year after the investment.

Suggested Citation

  • Josh Lerner & Shai Bernstein & Antoinette Schoar, 2009. "The Investment Strategies of Sovereign Wealth Funds," Working Papers 2009.25, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2009.25
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    General Finance; Countries & Regions; Financial Services;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    NEP fields

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