The Role of Sovereign Wealth Funds as Activist or Passive Fund Managers
Forthcoming, Journal of Asset Management
22 Pages Posted: 31 Aug 2015
Date Written: August 30, 2015
Sovereign Wealth Funds (SWF) have attracted a lot media attention with recent investments in publicly listed companies. Repeatedly, concerns have been raised, such as the fear of industrial espionage or geopolitical threats. We analyze whether SWF managers acquire stakes in foreign publicly listed firms 1) to play an active role which would support concerns or 2) passively select investments to increase the portfolio diversification, for instance. We find that SWF target firms are more profitable, pay higher dividends and have a higher financial stability than their industry peers. This is in line with SWF managers passively seeking for further portfolio diversification in foreign public equity markets. We cannot find an improvement in operating or market performance after the engagement of SWF. Overall, our results indicate strong evidence that SWF managers primarily act as passive investors instead of pursuing activism strategies like private equity funds.
Keywords: Sovereign Wealth Fund, Public Pension Fund, Shareholder Activism, Stock Picking, Event Study, Outperformance
JEL Classification: G14, G32, G34, G38
Suggested Citation: Suggested Citation