Sovereign Wealth Funds and the COVID-19 shock: Economic and Financial Resilience in Resource-Rich Countries

29 Pages Posted: 4 Aug 2020

See all articles by Bernardo Bortolotti

Bernardo Bortolotti

Bocconi University; University of Turin

Veljko Fotak

School of Management, University at Buffalo (SUNY); Sovereign Investment Lab, Baffi Carefin, Bocconi University

Date Written: August 2020

Abstract

Commodity (primarily oil) funds are facing today the most severe adverse shock of their history. The COVID-19 pandemic has accelerated the crisis in oil-rich nations, already hit by low oil prices and declining hydrocarbon revenues. Governments of all stripes are tapping sovereign wealth and foreign exchange reserves to stabilize their budgets and mitigate the effects of the ensuing recession. The future of SWFs is at risk. In this article, we provide anecdotal evidence about SWFs’ behavior during the COVID-19 crisis. We subsequently quantify, using updated national official statistics, the economic and financial resilience of the main resource-producing nations and link it to possible future trends in sovereign investment. We conclude that the COVID-19 crisis may induce profound changes in the industry. In the future, we expect SWFs to become more leveraged, to favor domestic over overseas investment, and to focus on broader economic and social impact than purely financial returns.

Keywords: Sovereign wealth fund, state ownership

JEL Classification: G32, G15, G38

Suggested Citation

Bortolotti, Bernardo and Fotak, Veljko, Sovereign Wealth Funds and the COVID-19 shock: Economic and Financial Resilience in Resource-Rich Countries (August 2020). BAFFI CAREFIN Centre Research Paper No. 2020-147, Available at SSRN: https://ssrn.com/abstract=3665993 or http://dx.doi.org/10.2139/ssrn.3665993

Bernardo Bortolotti (Contact Author)

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136
Italy

University of Turin

Via Po 53
Torino, Turin - Piedmont 10100
Italy

Veljko Fotak

School of Management, University at Buffalo (SUNY) ( email )

School of Management, University at Buffalo
236 Jacobs Management Center
Buffalo, NY 14260
United States
+1 716-645-1541 (Phone)

Sovereign Investment Lab, Baffi Carefin, Bocconi University ( email )

Via Roentgen 1
Milan
Italy

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