Research conducted as part of the Sustainable Investment initiatives explores the specificities of SWFs and other long-term investors, including their objectives, capabilities, and constraints. Working papers and books have also been produced.
Global Public Goods and Investment Obstacles: A Survey of the Long-term Institutional Perceptions
Rachel Harvey, Patrick Bolton, Frédéric Samama, Laurence Wilse-Samson, and Li An
To mobilize long-term investment to confront global challenges, further research is needed in two key obstacles to investment. In an era of globalized financial markets and unevenly distributed assets, cross-border investment is essential, as domestic investment alone is insufficient for the provision of global public good. At the same time, cross-border investments are subject to various regulatory, organizational or investment climate factors that might constrain funds seeking to make such investments. It is important to understand how investors perceive and respond to these constraining factors. Further research is needed to understand how investors conceptualize long-term investing, and to define and understand what objectives are most associated with this attitude or strategy.
In an attempt to address this problem, an online survey was conducted between August 2011 and December 2012. Lead researcher Dr. Rachel Harvey invited senior management at SWFs, pension funds, development banks and private equity firms to rank the factors decreasing the likelihood that they would invest in another country, and to identify objectives associated with long-term investing. The survey showed that foreign policy factors, as opposed to organizational and investment climate issues, had the greatest likelihood of decreasing the possibility a fund would make cross-border investments. Finally, respondents associated long-term investing with increasing or storing wealth for future generations. For some of the funds, this objective was not seen as incompatible with the maximization of portfolio financial performance. This finding suggests the potential for long-term investors to be important contributors to the provision of global public goods.
Infrastructure Investment Platform for Middle East Sovereign Wealth Funds in Africa
While SWFs might seem a natural match for real estate or infrastructure investments in emerging markets, political obstacles and lack of expertise have prevented them from taking large stakes in these types of assets. For SWFs from countries looking to diversify beyond natural resource extraction, like those in the Middle East, these types of investments are significant. The low-income countries of Africa are a natural target for these investments, where the major economic transformation presently underway promises years of growth that would be expedited by improvements in infrastructure.
This research explores the establishment of an Infrastructure Investment Platform (IIP) as one possible institutional response to take advantage of the enormous opportunities that can be made available in the near future by channeling the very large pools of savings from the Gulf region and Asia to the growth opportunities that presently exist in Africa. Future research aims to explore in greater detail how such an IIP could be set up, how it would originate projects from various host countries, how it would be governed, and how it could finance these projects with asset-backed securities. It will investigate the overall benefits in terms of national economic growth, social impact and commercial returns from coordinated investments in infrastructure development by SWF‘s from the Middle East and elsewhere into to low-income countries in Africa. Two key questions are 1) whether infrastructure investments by SWFs on a global scale can function similarly to a vehicle for structured real estate finance, and 2) whether the coordination problems involved in large-scale infrastructure investments between host country governments, multilateral donors and international private and governmental financial institutions can be overcome.
L-Shares: Rewarding Long-term Investors (November 2012)
Patrick Bolton and Frédéric Samama
Sovereign Wealth Funds and Long-Term Investing (November 2011)
Edited by Patrick Bolton, Frederic Samama, and Joseph E. Stiglitz (Columbia University Press).