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Begin New Search Topic Sovereign Wealth Funds Political Geography Global Focus

1. Sovereign wealth funds are growing more slowly, and governance issues remain

Author:
Julien Maire, Adnan Mazarei, and Edwin M. Truman
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
In the last two decades, sovereign wealth funds (SWFs)—funds accumulated by a government that are invested in whole or in part abroad to benefit the country in the future—have faced increased public scrutiny over their investment patterns, financial results, and governance. This Policy Brief updates and expands a prototype scoreboard rating the transparency and accountability of SWFs, which Truman established in 2007. This fifth edition of the scoreboard shows that the average scores continued to improve for the 64 SWFs examined, but governance issues remain. New funds have emerged—many of them government holding companies or strategic investment funds—but the growth of assets under management by SWFs has slowed, in some cases partly because of withdrawals to help finance expenses related to the COVID-19 pandemic, raising questions about their future role.
Topic:
Government, Markets, Sovereign Wealth Funds, Governance, Regulation, and Capital
Political Geography:
Global Focus

2. Creating a Euro Area Safe Asset without Mutualizing Risk (Much)

Author:
Alvaro Leandro and Jeromin Zettelmeyer
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This paper explains and evaluates three proposals to create “safe assets” for the euro area based on sovereign bonds, in which sovereign risk is limited through diversification and some form of seniority. These assets would be held by banks and other financial institutions, replacing concentrated exposures to their own sovereigns. The paper focuses on three ideas: (1) to create multitranche “sovereign bond-backed securities” (SBBS), of which the senior tranche would constitute a safe asset; (2) to create a senior, publicly owned financial intermediary that would issue a bond backed by a diversified portfolio of sovereign loans (“E-bonds”); and (3) to issue sovereign bonds in several tranches and induce banks to hold a diversified pool of senior sovereign bonds (“multitranche national bond issuance”). Public attention (including public criticism) has so far focused on the first idea; the other two have not yet been seriously debated. The authors find that none of the competing proposals entirely dominates the others. SBBS do not deserve most of the criticism to which they have been subjected. At the same time, E-bonds and multitranche national bond issuance have several interesting features—including inducing fiscal discipline—and warrant further exploration.
Topic:
Economics, Sovereign Wealth Funds, Banks, and Risk
Political Geography:
Europe and Global Focus