Katharina Pistor and Kyle Hatton

October 2010


Sovereign wealth funds (“SWFs”) have received a great deal of attention since they appeared as critical investors during the global financial crisis. Reactions have ranged from fears of state intervention and mercantilism to hopes that SWFs will emerge as model long-term investors that will take on risky investments in green technology and infrastructure that few private investors are willing to touch. In this paper we argue that both of these reactions overlook the fact that SWFs are deeply embedded in the political economy of their respective sovereign sponsors. This pa-per focuses on four political entities that sponsor some of the largest SWFs worldwide: Kuwait, Abu Dhabi, Singapore and China. Each of them has been governed for decades by elites whose grip on power has been tied to the economic fortune of their respective economies and their ability to pacify, or at least balance against, foreign powers. We argue that for these four political entities, both the motives for establishing SWFs and the strategies they employ can best be explained by an “autonomy-maximization” theory.

View the paper here: Maximizing Autonomy in the Shadow of Great Powers: The Poltical Economy of Sovereign Wealth Funds.