Are Government Owned Investment Funds Created Equal? Evidence From Sovereign Wealth Fund Real Estate Acquisitions

Journal of Real Estate Finance and Economics, 2019

53 Pages Posted: 13 Feb 2020

See all articles by Peng Liu

Peng Liu

Cornell University - S.C. Johnson College of Business

Nathan Mauck

University of Missouri - Kansas City

S. McKay Price

Lehigh University - Perella Department of Finance

Date Written: September 13, 2019

Abstract

Sovereign Wealth Funds (SWFs) are an institutional investor class about which relatively little is known. Even though they have trillions of dollars in assets under management, their (typically) highly secretive nature renders them difficult to analyze in an academic context. We utilize transactional data from the Sovereign Wealth Fund Institute to provide the first academic analysis of SWF real estate investment activity of which we are aware. To better understand this growing investor class, we compare SWFs with their most closely related institutional group, public pension funds (PPFs). While both SWFs and PPFs are state owned investment funds, we find SWFs have lower Stone and Truman (2016) best practice scores (based on fund structure, governance, transparency and accountability, and behavior.) Further, while both SWFs and PPFs show increasing levels of cross-border real estate investment, SWFs are significantly more likely than PPFs to invest across international borders. We find the percentage of SWF cross-border real estate investment to be substantially higher than the percentage of SWF cross-border investment in public and private equity documented in other studies. Moreover, in a subsample of acquisitions in the U.S., cross-border real estate investments are in locations with lower capitalization rates than domestic acquisitions for both SWFs and PPFs, and there is no discernable difference in rates across the two fund types, on average.

Keywords: Sovereign Wealth Funds, Real Estate Investment, International Real Estate, Foreign Investment, Cross-Border Investment, Public Pension Funds

JEL Classification: F21, G11, G23, O16, O18, P52

Suggested Citation

Liu, Peng and Mauck, Nathan and Price, S. McKay, Are Government Owned Investment Funds Created Equal? Evidence From Sovereign Wealth Fund Real Estate Acquisitions (September 13, 2019). Journal of Real Estate Finance and Economics, 2019. Available at SSRN: https://ssrn.com/abstract=3522610

Peng Liu

Cornell University - S.C. Johnson College of Business ( email )

448 Statler Hall
Ithaca, NY 14853
United States
6072542960 (Phone)

Nathan Mauck

University of Missouri - Kansas City ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

S. McKay Price (Contact Author)

Lehigh University - Perella Department of Finance ( email )

621 Taylor Street
Bethlehem, PA 18015
United States
610-758-4787 (Phone)

HOME PAGE: http://www.mckayprice.com

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