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Managing Public Investment Funds: Best Practices and New Challenges

Author

Listed:
  • Olivia S. Mitchell
  • John Piggott
  • Cagri Kumru

Abstract

Large publicly-held pools of assets are playing an increasingly prominent role in the global investment arena. We compare three distinct forms of such public funds, namely foreign exchange reserve funds, sovereign wealth funds, and public pension funds, to highlight their differences and similarities. We review previous studies on ways to better secure prudent and economically sound public fund management practices in these funds, as well as how to evaluate their governance and investment policies and how to better protect the assets from political interference. Drawing from the pension and corporate finance literature, we also link their management to governance practices and country-specific characteristics, and contrast those with empirical findings on linkages with corporate governance.

Suggested Citation

  • Olivia S. Mitchell & John Piggott & Cagri Kumru, 2008. "Managing Public Investment Funds: Best Practices and New Challenges," NBER Working Papers 14078, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14078
    Note: AG PE
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    References listed on IDEAS

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    1. Klapper, Leora F. & Love, Inessa, 2004. "Corporate governance, investor protection, and performance in emerging markets," Journal of Corporate Finance, Elsevier, vol. 10(5), pages 703-728, November.
    2. Kumru, Çagri S. & Thanopoulos, Athanasios C., 2008. "Social security and self control preferences," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 757-778, March.
    3. Alberto R. Musalem & Robert J. Palacio, 2004. "Public Pension Fund Management : Governance, Accountability, and Investment Policies," World Bank Publications, The World Bank, number 14880, July.
    4. Palacios, Robert, 2002. "Managing public pension reserves Part II : lessons from five recent OECD initiatives," Social Protection and Labor Policy and Technical Notes 33407, The World Bank.
    5. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    6. Michael Useem & Olivia S. Mitchell, "undated". "Holders of the Purse Strings: Governance and Performance of Public Retirement Systems," Pension Research Council Working Papers 2000-3, Wharton School Pension Research Council, University of Pennsylvania.
    7. Ping-Lung Hsin & Olivia Mitchell, 1994. "The Political Economy of Public Pensions: Pension Funding, Governance, and Fiscal Stress," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 9(1), pages 151-168, June.
    8. Haberman, Steven & Butt, Zoltan & Megaloudi, Chryssoula, 2000. "Contribution and solvency risk in a defined benefit pension scheme," Insurance: Mathematics and Economics, Elsevier, vol. 27(2), pages 237-259, October.
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    10. Iglesias, Augusto & Palacios, Robert J., 2000. "Managing public pension reserves - Part I : evidence from the international experience," Social Protection and Labor Policy and Technical Notes 21311, The World Bank.
    11. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    12. Oecd, 2006. "OECD Guidelines on Pension Fund Asset Management," Financial Market Trends, OECD Publishing, vol. 2006(2), pages 171-187.
    13. Takashi Oshio, 2004. "Social Security and Trust Fund Management," NBER Working Papers 10444, National Bureau of Economic Research, Inc.
    14. Oshio, Takashi, 2004. "Social Security and Trust Fund Management," Discussion Paper 192, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    15. Edwin M. Truman, 2007. "Sovereign Wealth Funds: The Need for Greater Transparency and Accountability," Policy Briefs PB07-6, Peterson Institute for International Economics.
    16. Olivia S. Mitchell & Ping Lung Hsin, 1994. "Public Sector Pension Governance and Performance," NBER Working Papers 4632, National Bureau of Economic Research, Inc.
    17. Julia Devlin, 2004. "Managing Oil Price Risk in Developing Countries," World Bank Research Observer, World Bank Group, vol. 19(1), pages 119-139.
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    1. repec:eee:hapoch:v1_865 is not listed on IDEAS
    2. Andrew Mason & Ronald Lee, 2011. "Introducing age into national accounts," Chapters,in: Population Aging and the Generational Economy, chapter 3 Edward Elgar Publishing.
    3. Javier Santiso, 2009. "Les fonds souverains : des acteurs clés dans la nouvelle géographie des richesses," Revue d'Économie Financière, Programme National Persée, vol. 9(1), pages 315-342.
    4. Ashby H. B. Monk, 2008. "Is CalPERS a Sovereign Wealth Fund?," Issues in Brief ib2008-8-21, Center for Retirement Research, revised Dec 2008.
    5. Piggott John R. & Sane Renuka, 2012. "Demographic Shift and Financial Markets in APEC: New Age Solutions to Age Old Challenges," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 6(1), pages 1-28, February.
    6. Javier Santiso, 2009. "Sovereign Development Funds : Key Financial Actors of the Shifting Wealth of Nations," Revue d'Économie Financière, Programme National Persée, vol. 9(1), pages 291-315.
    7. Ricardo Bebczuk & Alberto Musalem & María Luisa Streb, 2011. "Suggesting Guidelines for Public Pension Funds Governance," Department of Economics, Working Papers 089, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    8. Jeffrey B. Nugent & Sara Bazoobandi, 2017. "Political Economy of Sovereign Wealth Funds in the Oil Exporting Countries of the Arab Region and Especially the Gulf," Working Papers 1143, Economic Research Forum, revised 10 May 2003.

    More about this item

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G2 - Financial Economics - - Financial Institutions and Services
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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