Sovereign Development Funds: Designing High-Performance, Strategic Investment Institutions

17 Pages Posted: 3 Oct 2015 Last revised: 6 Oct 2015

See all articles by Peter Clark

Peter Clark

Stanford University - Global Projects Center

Ashby H. B. Monk

Stanford University - Global Projects Center

Date Written: September 30, 2015

Abstract

In a slowing global economy with diminished confidence in the long-term prospects for public financial markets, many institutional investors are looking for innovative, alternative, and often private, investment strategies to meet elevated expected return targets. One source of potential inspiration has, perhaps surprisingly, come from the community of sovereign development funds. SDFs are strategic, government-sponsored investment organizations that have dual objective functions: to deliver high financial performance, while fostering development. Despite an expectation that this dual objective function inevitably leads to financial underperformance, SDFs have actually delivered consistently high investment returns, especially in private markets. As such, SDF strategies are increasingly being used as a model for investment strategies among non-developmental investment organizations. In this paper, then, we explore the rise of SDFs, account for some of their outsized performance and conceptualize models for SDF governance and management. Our intention is to provide a flexible blueprint for governments or agencies seeking to establish these funds, but our insights are also intended for all institutional investors looking for new ways to generate ‘alpha.’

Keywords: Active Management, Institutional Investment, Sovereign Development Funds

Suggested Citation

Clark, Peter and Monk, Ashby H. B., Sovereign Development Funds: Designing High-Performance, Strategic Investment Institutions (September 30, 2015). Available at SSRN: https://ssrn.com/abstract=2667974 or http://dx.doi.org/10.2139/ssrn.2667974

Peter Clark

Stanford University - Global Projects Center ( email )

United States

Ashby H. B. Monk (Contact Author)

Stanford University - Global Projects Center ( email )

United States

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