Ch 4: Sovereign Wealth Funds (SWFs) in Five Continents and Three Narratives: Similarities and Differences

Abstract

Organized and targeted state interventions in private markets, especially with respect to investments beyond their own territories, have raised complex issues. These public activities effectuated through private markets abroad, particularly when undertaken in the form of sovereign wealth funds (SWFs,) raise issues with respect to the viability of the private market-based foundations of globalization. These issues become more acute as the separation between the economic and political interests of sovereign investors becomes less clear and as that blurred line of separation crosses over from the domestic to international arenas. The issues become more complex as SWFs become ever more varied in structure, objectives, operations and habits. The most successful response has produced a master narrative, a transcendent and universal truth, of SWFs, that situates this phenomenon legitimately within the logic the emerging anarchic and polycentric global ordering, and two alternative visions. Yet even within these narratives, the myth of the monolithic SWF has resulted in a tendency to exclude rather than study the variety and regionalization of SWFs as they are developing in fact. Is it possible to discern regional affinities among SWFs even within the emerging narratives within which SWFs are conceived? This chapter explores SWF regionalization grounded in three distinct narrative foundations for SWF regionalism — an economic purpose narrative, a legalist narrative, and a corporatist narrative. The first currently serves as the “master narrative” of SWFs and as the lens through which SWFs are understood and around which analysis (especially social science and political analysis) and theory tend to be structured. The other two are alternative narratives that sometimes layer and sometimes seek to displace the master economics narrative. Each produces its own approach to understanding SWF regionalism. My thesis is that geographic proximity alone does not explain the variation in SWF form, though political and cultural affinity may. Instead, the distinctive narratives within which SWFs are conceptualized produce forms of regionalization that provide a powerful tool for structuring analysis of differences among national SWF models. But each tends to ignore the heterogeneity of SWF form and operation (which aligns with the anarchy and polycentricity of globalization). More importantly each serves to reinforce power structures that are used instrumentally — in this case to suggest a grand theory of SWF legitimacy and the conditions under which it can be realized. In particular, the “regional” categories discernable through the distinctive lenses of the narratives produce clearly distinctive “regions” of SWFs, grounded on the logic of the narrative rather than on the geographic home of the SWF. Part II considers the logic of each of the narratives. Part III then considers regionalization under each of these narratives, with a focus on the connection between geographic and narrative regionalism.

Keywords: sovereign wealth funds, sovereign investing, extraterritoriality, development funds, pension funds, responsible investing, active shareholding, Santiago Principles, China, Norway

JEL Classification: E63, F33, G23, H53, H54, K33, O11, O57