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Managing Public Investment Funds: Best Practices and New Challenges

  • Olivia S. Mitchell
  • John Piggott
  • Cagri Kumru

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14078.

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Date of creation: Jun 2008
Date of revision:
Publication status: published as Mitchell, Olivia S. & Piggott, John & Kumru, Cagri, 2008. "Managing public investment funds: best practices and new questions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 7(03), pages 321-356, November.
Handle: RePEc:nbr:nberwo:14078
Note: AG PE
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  1. Palacios, Robert, 2002. "Managing public pension reserves Part II : lessons from five recent OECD initiatives," Social Protection Discussion Papers 33407, The World Bank.
  2. Arrau, Patricio & Claessens, Stijn, 1992. "Commodity stabilization funds," Policy Research Working Paper Series 835, The World Bank.
  3. Julia Devlin, 2004. "Managing Oil Price Risk in Developing Countries," World Bank Research Observer, World Bank Group, vol. 19(1), pages 119-139.
  4. 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.
  5. Oshio, Takashi, 2004. "Social security and trust fund management," Journal of the Japanese and International Economies, Elsevier, vol. 18(4), pages 528-550, December.
  6. 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.
  7. Andrei Shleifer & Robert W. Vishny, 1996. "A Survey of Corporate Governance," NBER Working Papers 5554, National Bureau of Economic Research, Inc.
  8. 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.
  9. Klapper, Leora F. & Love, Inessa, 2002. "Corporate governance, investor protection, and performance in emerging markets," Policy Research Working Paper Series 2818, The World Bank.
  10. Michael Useem & Olivia S. Mitchell, 2000. "Holders of the Purse Strings: Governance and Performance of Public Retirement Systems," Center for Financial Institutions Working Papers 00-08, Wharton School Center for Financial Institutions, University of Pennsylvania.
  11. Alberto R. Musalem & Robert J. Palacio, 2004. "Public Pension Fund Management : Governance, Accountability, and Investment Policies," World Bank Publications, The World Bank, number 14880, September.
  12. Edwin M. Truman, 2007. "Sovereign Wealth Funds: The Need for Greater Transparency and Accountability," Policy Briefs PB07-6, Peterson Institute for International Economics.
  13. Takashi Oshio, 2004. "Social Security and Trust Fund Management," NBER Working Papers 10444, National Bureau of Economic Research, Inc.
  14. Iglesias, Augusto & Palacios, Robert J., 2000. "Managing public pension reserves - Part I : evidence from the international experience," Social Protection Discussion Papers 21311, The World Bank.
  15. Oshio, Takashi, 2004. "Social Security and Trust Fund Management," Discussion Paper 192, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  16. Oecd, 2006. "OECD Guidelines on Pension Fund Asset Management," Financial Market Trends, OECD Publishing, vol. 2006(2), pages 171-187.
  17. Jan-Peter Olters, 2007. "Old Curses, New Approaches? Fiscal Benchmarks for Oil-Producing Countries in Sub-Saharan Africa," IMF Working Papers 07/107, International Monetary Fund.
  18. Ping-Lung Hsin & Olivia S. Mitchell, . "The Political Economy of Public Pensions: Pension Funding, Governance, and Fiscal Stress," Pension Research Council Working Papers 94-6, Wharton School Pension Research Council, University of Pennsylvania.
  19. Olivia S. Mitchell & Ping Lung Hsin, 1994. "Public Sector Pension Governance and Performance," NBER Working Papers 4632, National Bureau of Economic Research, Inc.
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