The Investment Allocation of Sovereign Wealth Funds
University of Miami
European Central Bank (ECB); Centre for Economic Policy Research (CEPR); International Monetary Fund (IMF)
July 8, 2009
Sovereign wealth funds have emerged as an important investor of global equity, attracting growing attention. Despite frequently voiced concerns that sovereign wealth funds serve political objectives, little is known about their investment allocation. We collect new data on close to 30,000 equity investments by sovereign wealth funds and using both a country-level and firm-level analysis find that they tend to invest in countries with common cultural traits. This cultural bias indicates that sovereign wealth funds prefer to invest in the familiar. While other global investors show similar aptitude to investing in the familiar, the cultural bias of sovereign wealth fund investment is particularly pronounced.
Number of Pages in PDF File: 52
Keywords: Sovereign wealth funds, Asset allocation, Culture, Information
JEL Classification: G3
Date posted: September 3, 2008 ; Last revised: July 14, 2009
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