Sovereign Wealth Funds in Central and Eastern Europe: Scope and Methods of Financial Penetration

Financial Internet Quarterly "e-Finanse" 2015, vol.11 / nr 1 pp. 11 - 21

12 Pages Posted: 29 Jun 2015

See all articles by Piotr Wiśniewski

Piotr Wiśniewski

Warsaw School of Economics - Corporate Finance Unit, Institute of Finance, College of Management and Finance

Tomasz Kaminski

University of Lodz - Faculty of International and Political Studies

Marcin Obroniecki

Ministry of Finance of Poland

Date Written: June 26, 2015

Abstract

The Central and Eastern European (CEE) capital markets (of Poland, Lithuania, Latvia, Estonia, the Czech Republic, Slovakia, Hungary, Ukraine and, to a limited extent, Belarus) are gradually evolving towards increased breadth (diversity) and depth (liquidity), however, they are still exposed to considerable cross-country volatility and interdependence spill-overs – especially in times of capital flight to more established asset classes (“safe havens”). Sovereign Wealth Funds (SWFs) have widely been censured for their undesirable political interference and chronic operational opacity. This paper demonstrates that in CEE, contrary to widespread perceptions attributable to developed markets, SWFs can act as natural and powerful risk mitigators (contributing to a more stable capital base and reduced systemic volatility). Such a proposition is premised on several factors specific to SWFs oriented to CEE. They comprise: strategic long-termism and patience in overcoming interim pricing deficiencies, commitments to elements of a broadly interpreted infrastructure, and absence of overt conflicts of interest with the CEE host economies. The paper, besides reviewing the utilitarianism of SWFs in the CEE’s risk mitigation context, highlights regulatory and technical barriers to more SWF funding for CEE. It also recommends policy measures to the CEE economies aimed at luring more host-friendly SWF investment into the region.

Keywords: sovereign wealth funds, SWFs, risk mitigation, stability of financial industries, political impact

Suggested Citation

Wiśniewski, Piotr and Kaminski, Tomasz and Obroniecki, Marcin, Sovereign Wealth Funds in Central and Eastern Europe: Scope and Methods of Financial Penetration (June 26, 2015). Financial Internet Quarterly "e-Finanse" 2015, vol.11 / nr 1 pp. 11 - 21, Available at SSRN: https://ssrn.com/abstract=2624051

Piotr Wiśniewski (Contact Author)

Warsaw School of Economics - Corporate Finance Unit, Institute of Finance, College of Management and Finance ( email )

Madalinskiego 6/8
PL-Warsaw, 02-513
Poland

Tomasz Kaminski

University of Lodz - Faculty of International and Political Studies ( email )

Ulica Prezydenta Gabriela
Narutowicza 65 str.
Lodz, 90-131
Poland

Marcin Obroniecki

Ministry of Finance of Poland ( email )

Warsaw
Poland

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