Sovereign Wealth Fund Governance and Changing State-Market Relationships

• In Event: Politics of International Finance

Abstract

Recent IPE scholarship has highlighted renewed interest in state-led financing strategies as an important part of changing state-market relationships. One understudied aspect of this trend is the increased use of Sovereign Wealth Funds (SWFs) to invest state wealth in global financial markets. SWF investment can be viewed as a tool for governments to take on an active role as financial market players. This has raised concern about the potential influences of political and strategic motives on the allocation of financial capital and SWF's execution of shareholder rights in strategically important foreign companies. This paper investigates SWF governance structures to better understand political motives' role in SWF decision-making. In some countries, governments directly engage in SWF investment, making them potential tools for economic statecraft. In other countries, SWF structures, seem to reflect pressures towards state financialization as well as regulatory capitalism through the professionalisation of sovereign wealth management in the hands of commercial investment experts. I argue that this variation reflects differing prevalent beliefs about the appropriate role and responsibilities of the state vis-à-vis the economy. To empirically investigate this theory, this paper integrates a quantitative outcome-based analysis based on a novel data set on the governance structures of all 86 SWFs in 2020 with four case studies. The findings of this paper improve our understanding of how different countries manage their sovereign wealth and the degree to which different approaches to state-led financial strategies reflect intentions changing state interactions with global financial markets.

Author

• Katharina Fleiner, University of Geneva