By Brett Keller | <a
GlobalPensions.com has an interesting article by Jenny Blinch that includes a summary of views on sovereign wealth funds (SWFs) by managers of pension funds on a recent panel:
Asked to pick which response best described their view of SWFs, some 50% of panel members chose, “They will push the boundaries of investment in the same way endowment funds and huge pension funds do and will therefore be an example for pension funds to follow”, while only 29% picked, “They are competition”.
Another perspective is that of James Dibiasio, who wrote “SWFs must go passive” in Asian Investor last week. Dibiasio more or less takes the opposite view, that sovereign wealth funds will adopt more strategies from the likes of pension funds over time:
Sovereign wealth funds are expected to take up index investing in order to achieve broad diversification in equities, with direct or strategic investments becoming relatively fewer as a proportion of rapidly growing assets under management.
Others see more complex change ahead for SWFs. Back in July Thao Hua wrote “SWFs’ incluence expected to grow” in Pensions & Investments Online. Outside the rather obvious title, Hua makes the point that SWFs can increasingly pursue both the short term investment strategies associated with stabilization funds, and lower risk options a la pensions.
As fund officials have “more confidence in their financial future,” they’ve lengthened their investment horizons and explored a wider set of asset classes in which to invest, Mr. Nugee said during the presentation. For many SWFs, what started out as a stabilization fund “often morphs into a pension reserve or an endowment-type future-generations fund,” according to the report. In other cases, excess central bank reserves previously invested mostly in liquid government bonds are being shifted into riskier investments with higher potential returns such as equity.
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