Sovereign Wealth Funds and Domestic Political Risk

Oxford University Press Handbook on Sovereign Wealth Funds, Forthcoming

Ohio State Public Law Working Paper No. 312

39 Pages Posted: 13 Oct 2015 Last revised: 9 Jun 2017

See all articles by Paul Rose

Paul Rose

Ohio State University - Moritz College of Law; Bocconi University - BAFFI Center on International Markets, Money, and Regulation; Tufts University - The Fletcher School of Law and Diplomacy; Fundación Instituto de Empresa, S.L. - IE Business School

Date Written: October 12, 2015

Abstract

As Sovereign wealth funds (SWFs) mature and as the literature describing and analyzing SWFs continues to develop, some of the primary concerns that initially animated SWF analysis — namely, SWFs as a sign of shifting financial power, SWFs as potential political actors, and the corresponding protectionist responses from governments — have turned to fundamental concerns about how SWFs are governed. Even within this literature, however, questions of governance are often focused not on the domestic impacts of SWF governance, but on SWF governance as risk mitigation for other entities and governments. For some analysts and regulators, SWFs must be quarantined; little thought is given to the health of the SWF itself, so long as it does not adversely affect other entities.

This draft chapter (forthcoming, Oxford University Press Handbook on Sovereign Wealth Funds) discusses SWF governance as a domestic political issue, and not merely as an international political issue. In particular, this chapter adds to the literature on the domestic legitimacy of SWFs, and how poor management of SWFs can create or exacerbate domestic political risks. Among the threats to legitimacy are issues involving ultimate ownership of the fund, corruption, unclear of shifting purposes of the fund and the use of the fund’s earnings, and misalignment of the fund with societal mores and interests.

Keywords: sovereign wealth funds, political risk, legitimacy

JEL Classification: K2

Suggested Citation

Rose, Paul, Sovereign Wealth Funds and Domestic Political Risk (October 12, 2015). Oxford University Press Handbook on Sovereign Wealth Funds, Forthcoming; Ohio State Public Law Working Paper No. 312. Available at SSRN: https://ssrn.com/abstract=2673112

Paul Rose (Contact Author)

Ohio State University - Moritz College of Law ( email )

55 West 12th Avenue
Columbus, OH 43210
United States

Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

Milano, 20136
Italy

Tufts University - The Fletcher School of Law and Diplomacy ( email )

Medford, MA 02155
United States

Fundación Instituto de Empresa, S.L. - IE Business School ( email )

Calle Maria de Molina 12, Bajo
Madrid, Madrid 28006
Spain

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