The Four Benchmarks of Sovereign Wealth Funds

29 Pages Posted: 22 Sep 2010  

Andrew Ang

BlackRock, Inc

Date Written: September 21, 2010

Abstract

The benchmarks of a Sovereign Wealth Fund (SWF) should take into account the economic and political context behind the creation of the SWF and the role the SWF plays as one part of a government’s overall policy. The first benchmark of legitimacy ensures that the capital of the SWF is not immediately spent and instead, is gradually disbursed across the present and future generations. The second integrated policy benchmark recognizes the implicit liabilities of the SWF by taking into account its role in government fiscal and other macro policies. Meeting these two standards should be a prerequisite before setting the performance benchmark, which goes hand in hand with the governance structure of the SWF. Finally, the long-term horizon requires a SWF to consider the long-run equilibrium benchmark of the markets in which the SWF invests and the long-term externalities affecting the SWF.

Keywords: legitimacy, performance, management, government, equilibrium, long run

JEL Classification: E21, E61. F30, F40, G11, G18, G20, G30, H10, H60, M5, O11

Suggested Citation

Ang, Andrew, The Four Benchmarks of Sovereign Wealth Funds (September 21, 2010). Available at SSRN: https://ssrn.com/abstract=1680485 or http://dx.doi.org/10.2139/ssrn.1680485

Andrew Ang (Contact Author)

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

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