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The Four Benchmarks of Sovereign Wealth Funds

Andrew Ang

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

September 21, 2010

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.

Number of Pages in PDF File: 29

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

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

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Date posted: September 22, 2010  

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

Contact Information

Andrew Ang (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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