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The Investment Allocation of Sovereign Wealth Funds

52 Pages Posted: 3 Sep 2008 Last revised: 14 Jul 2009

Vidhi Chhaochharia

University of Miami

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Date Written: 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.

Keywords: Sovereign wealth funds, Asset allocation, Culture, Information

JEL Classification: G3

Suggested Citation

Chhaochharia, Vidhi and Laeven, Luc, The Investment Allocation of Sovereign Wealth Funds (July 8, 2009). Available at SSRN: or

Vidhi Chhaochharia (Contact Author)

University of Miami ( email )

514 Jenkins Building
Miami, FL 33124
United States

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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