The Rise of State-Owned Investors: Sovereign Wealth Funds and Public Pension Funds

Abstract

State-owned investors (SOIs), including sovereign wealth funds and public pension funds, have $27 trillion in assets under management in 2020, making these funds the third largest group of asset owners globally. SOIs have become the largest and most important private equity investors and are key investors in other alternative asset investments such as real estate, infrastructure and hedge funds. SOIs are also leaders in promoting environmental, social and governance (ESG) and corporate social responsibility in investee companies. We document the rise of SOIs, assess their current investment policies, and describe how their state ownership both constrains and enhances their investment opportunity sets. We survey the most impactful recent academic research on sovereign wealth funds (SWFs), public pension funds (PPFs), and their closest financial analogs, private pension funds. We also introduce a new Governance-Sustainability-Resilience (GSR) Scoreboard for SOIs and survey research examining their role in promoting good corporate governance.

Keywords: Sovereign wealth funds, Public pension funds, Government policy and regulation

JEL Classification: G32, G15, G38