International Review of Financial Analysis 67 (2020) 101418

Contents lists available at ScienceDirect

International Review of Financial Analysis

journal homepage: www.elsevier.com/locate/irfa

Review

Sovereign wealth funds: Past, present and future T

a,b b a,⁎
Salman Bahoo , Ilan Alon , Andrea Paltrinieri
a
University of Udine, Italy
b
Agder University, Norway

ARTICLE INFO ABSTRACT

JEL classification: In this article, we conduct a meta-literature review of sovereign wealth funds (SWFs), covering 184 articles from
G20 2005 to 2019. Our meta-literature review consists of qualitative analysis of content using the NVivo software
G11 program and quantitative analyses of bibliometric citations using the HistCite and VOSviewer software pro-
H10 grams. We identify three main research streams: (i) the overview and growth of SWFs, (ii) governance and
F55
political concerns regarding SWFs, and (iii) the investment strategies of SWFs. We identify the most influential
G30
aspects of the SWF literature, such as the leading countries, institutions, journals, authors, and articles. Finally,
we propose 20 research questions based on the meta-literature review of sovereign wealth funds to set the future
Keywords:
Bibliometric citation analysis research agenda.
Cartographic analysis
Meta-analysis
Sovereign wealth funds
Literature review
Content analysis
Governance
Politics
Investment

1. Introduction
In recent years, the traditional view of nations as uninvolved players
in investment whose main influence is within the boundaries of their
administrative control has changed. The role of the state has been re-
designed as an advanced, directorial, strategic actor that intercedes in
investment in the form of the full ownership and control of state-owned
institutional investors (Aguilera, Capapé, & Santiso, 2016). This new
influence of the state has ushered in a new era of state capitalism in
which governments provide support to private firms (Musacchio &
Lazzarini, 2014). Under this “new state capitalism,” the nations that are
enriched with a large amount of foreign financial reserves from national
resources or trade surpluses have become symbolic institutional in-
vestors in the global economy through special-purpose investment ve-
hicles called sovereign wealth funds (SWFs) (Vasudeva, Nachum, & Say,
2017).
The term “sovereign wealth funds” was coined by Rozanov (2005)
in his work “Who Holds the Wealth of Nations?” Generally, SWFs are
defined as government-owned and controlled funds (Knill, Lee, &
Mauck, 2012b). In August 2018, their total asset under management
amounted to $7.97 trillion and 80 SWFs were in operation around the
world (SWFI, 2018). Over the last decade, SWFs have received a great
deal of attention due to the spike in oil prices that brought more rev-
enues to several SWF home countries, increasing overall SWF asset
under management, but also leading to a change in their
asset allocation (Bloomberg, 2018). The views on SWFs are mixed. Ereli
and Karasik (2018) consider SWFs a powerful tool of nations that can
create issues in the target firms' corporate governance. However, ac-
cording to the French president, they can help fight climate change,
given their relevant asset under management (AFP/The Local, 2018).
In the past 13 years, a reasonable body of literature on SWFs has
developed in multiple directions. Several papers and books reviewed
and analyzed the literature on SWFs (Alhashel, 2015; Anderson, 2009;
Balding, 2012; Cumming, 2017; Megginson & Fotak, 2015; Megginson
& Gao, 2019; Truman, 2010). Nevertheless, there is one common
weakness in past reviews, namely, that the paper selection was not
exhaustive and without bias (see Table 1). The past analyses were not
systematic and comprehensive, and did not cover the full literature on
SWFs.
In line with the model of Alon, Anderson, Munim, and Ho (2018),

⁎
Corresponding author at: Department of Economics and Statistics, University of Udine, Via Tomadini 30/A, 33100 Udine, Italy.
E-mail addresses: bahoo.salman@spes.uniud.it (S. Bahoo), ilan.alon@uia.no (I. Alon), andrea.paltrinieri@uniud.it (A. Paltrinieri).

https://doi.org/10.1016/j.irfa.2019.101418
Received 18 December 2018; Received in revised form 16 October 2019; Accepted 8 November 2019
Available online 15 November 2019
1057-5219/ © 2019 Elsevier Inc. All rights reserved.
S. Bahoo, et al. International Review of Financial Analysis 67 (2020) 101418

Table 1
Previous review papers and books on SWFs.
Tile/authors/years Research objectives (survey explores) Scope Methodology (sample,
technique, database, period)

Rise of the fiduciary state: A survey of
sovereign wealth fund research.
(Megginson & Fotak, 2015)
Sovereign wealth funds: A literature review
(Alhashel, 2015)
The state of research on sovereign wealth
funds (Megginson & Gao, 2019)
(i) SWFs' state-ownership and link with efficiency of SWF assets, Survey of specific Review of selected articles
(ii) funding sources of SWFs (oil or foreign reserves), (iii) characteristics or factors of related to the topic up to
strategic, geographical and sectoral asset allocation of SWFs, (iv) SWFs. 2015.
effect of SWFs on target firm's performance.
(i) SWFs' definition, history, regulations, (ii) investment Survey of specific Review of selected articles
strategies of SWFs characteristics or factors of related to the topic up to
SWFs. 2015.
(i) The focus is on cross-border SWF investment and its impact Survey of specific articles on Review of selected articles.
on the environment. the topic.

Important books
Take the Money and Run: Sovereign Wealth
Funds and the Demise of American
Prosperity Anderson (2009)
Sovereign Wealth Funds: Threat or Salvation?
Truman (2010)
Sovereign Wealth Funds: The New
Intersection of Money and Politics
Balding (2012)
The Oxford Handbook of Sovereign Wealth
Funds Cumming (2017)
(i) SWFs and national security and economic interests, (ii) SWF SWF investment strategies Review of a specific topic
investment in the US by the Persian Gulf States.
(i) overview, characteristics of SWFs, (ii) role of SWFs in the A practical view of SWFs Review of a specific topic
economy, (iii) list of 50 SWFs and their characteristics
(i) Book that reviews the history of SWFs from Abu Dhabi SWFs' history and Abu Dhabi Review of a specific topic
Investment Authority's involvement with the scandal-plagued Investment Authority
BCCI bank, (ii) overview and growth of SWFs
(i) Overview and consolidation of the literature on SWFs, (ii) Compiled literature Selected articles and topics.
review of multiple aspects such as governance, political
concerns, and regional country analysis of SWFs by dividing it
into multiple parts.

Note: The table summarizes the existing review papers and books published on SWFs.

Øyna and Alon (2018), and Zott, Amit, and Massa (2011), we con-
tribute to the existing literature by conducting a more extensive review
whose goal is to answer the following research questions: (1) What is
the domain of SWF research? (2) What are the most important aspects
of the SWF literature, such as the leading countries, institutions, jour-
nals, authors, and influential and trending articles and topics? (3) What
are the key research streams in the SWF literature? (4) What are the
relevant research questions for exploring SWFs further?
In this study, we go beyond the previous traditional reviews on
SWFs by conducting a meta-literature review for 2005 to August 2019.
We utilize a methodology consisting of bibliometric citation analysis
coupled with content analysis (Alon et al., 2018). It is important to
mention here that our meta-literature review is different from the meta-
analyses that normally end with regressions (Bessler, Conlon, & Huan,
2019; Białkowski & Perera, 2019; Campos, Fidrmuc, & Korhonen, 2018;
Fernau & Hirsch, 2019; Geyer-Klingeberg, Hang, & Rathgeber, 2018;
Papadamou, Kyriazis, & Tzeremes, 2019; Pérez-Calero, Hurtado-
González, & López-Iturriaga, 2019).
Conducting a bibliometric citation analysis is a burgeoning tech-
nique applied in a few review papers, mostly in management and social
science. In finance, in general, review papers are based on conventional
surveys on specific topics and issues (Ballester, Díaz-Mendoza, &
González-Urteaga, 2019; Corbet, Lucey, Urquhart, & Yarovaya, 2019;
Deku, Kara, & Zhou, 2018; French & Vigne, 2019; Garner, Humphrey, &
Simkins, 2016; Kearney & Liu, 2014; Nguyen & Boateng, 2015; Sensoy
& Omole, 2018). However, recently, a paper published in the Interna-
tional Review of Financial Analysis explored the literature on IPOs by
applying bibliometric citation techniques using VOSviewer software in
order to identify the relationship among citations, authors, countries,
and themes (Helbing, 2019). Similarly, Zamore, Ohene Djan, Alon, and
Hobdari (2018) used the same technique to review the literature on
credit risk. Recently, Paltrinieri, Hassan, Bahoo, and Khan (2019)
conducted a meta-literature review to assess the sukuk literature.
Overall, we analyze 184 articles through a meta-literature review,
outlining the domain of SWFs, the major research streams, the most
influential aspects of the literature, and suggesting future research di-
rections.
2. Methodology
Glass (1976) recommends conducting a meta-analysis of a vast body
of literature to extract knowledge from convoluted and critical research
studies. He defines meta-analysis as “the analysis of analysis.” In this
meta-literature review, we utilize both quantitative and qualitative
techniques, such as bibliometric citation and content analysis for the
SWF literature (Fetscherin, Voss, & Gugler, 2010). These two forms of
analyses have become prevalent approaches to meta-analysis in the
fields of management, business, and finance research (Zamore et al.,
2018).
As early as 1965, Price developed bibliometric methods to evaluate
and map scholarly articles. Content analysis is widely used in literature
reviews and case studies (Ahmed, Bahoo, & Ayub, 2019; Bahoo, Hassan,
Paltrinieri, & Khan, 2019; Bahoo, Saeed, Iqbal, & Nawaz, 2018). It is a
social science methodology to systematically review and confirm the
validity of knowledge in a specific field of research (Potter & Levine-
Donnerstein, 1999). Fig. 1 presents the complete and detailed picture of
this complex methodology.
2.1. Sample selection process
The sample selection process consists of three steps, shown in Fig. 1.
The first step is related to the selection of the database in order to
collect the bibliometric data about the scholarly articles. We selected
the ISI Web of Science (WOS) instead of Google Scholar and Science
Direct (Apriliyanti & Alon, 2017; Naatu & Alon, 2019). ISI WOS is a
prominent database that includes five databases, recognizing many
high-quality journals and starting from 1950. As a second step, we
searched the literature on SWFs at two levels. We first searched articles
through the keywords “Sovereign Wealth Funds” or “Sovereign Wealth
Fund” between 2005 and August 2019 in ISI WOS to collect the bib-
liometric data. We used 2005 as the cut-off period because the term
“SWFs” was introduced in that year. We found 265 articles using this
search. Second, we searched the influential working papers of the in-
stitutions on SWFs that are not available on ISI WOS. We found 18
articles in this search. Therefore, our initial sample size of 283 papers
consists of 265 articles from ISI WOS and 18 institutional working pa-
pers.

2
S. Bahoo, et al.
Fig. 1. Methodology.
The selection of the keywords is very important to ensure that we
cover the entire body of literature on SWFs. Therefore, to confirm that
our keywords included the entire spectrum of the literature, we con-
ducted a cartographic analysis through the VOSviewer software pro-
gram. The software accepts bibliometric data as an input and provides
the most repeated keywords in each research stream (see Fig. 5). Our
results showed that SWFs is the most repeated and representative
keyword in all three streams. Table 2 lists the sample selection process,
the search technique and the identification of the keywords through the
cartographic analysis.
The third step is related to the inclusion and exclusion of irrelevant
articles from the initial sample of 283 articles. Following Zott et al.
(2011), we relied on the criteria that any article must deal with, discuss,
examine or analyze SWFs as its direct content. Two independent au-
thors conducted this process. The result is a final sample of 184 articles
belonging to two datasets: (1) in the first dataset, used for bibliometric
citation analysis, we have 166 articles from ISI WOS published between
2005 and August 2019; (2) in the second dataset, we have a total of 184
documents (166 articles plus 18 working papers) that were content
analyzed.
2.2. Meta-literature review
Our meta-literature analysis consists of bibliometric citations
(quantitative) and content analyses (qualitative) of SWFs. Following
Liu, Bollen, Nelson, and Sompel (2005), Apriliyanti and Alon (2017),
Fetscherin and Heinrich (2015), Zamore et al. (2018) and Paltrinieri
et al. (2019), for the bibliometric citation analysis we conducted the
following analyses: (1) co-citation analysis, (2) co-authorships and (3)
cartographic analyses using two software programs, HistCite and
VOSviewer. Both programs accept articles as input files and provide
various details as outputs. The HistCite software is designed for the
bibliometric citation data of only ISI WOS (Fetscherin & Heinrich,
2015).
The outcomes of the HistCite software for bibliometric analyses are
the following (HistCite Glossary, 2018): (1) The Total Local Citations
(TLC), meaning how many times an article is cited by other articles in
3
International Review of Financial Analysis 67 (2020) 101418
the sample of a specific study. In our case, the sample for bibliometric
analysis consists of 166 articles. For example, the article by Kotter and
Lel (2011) that appears in Table 5 has a TLC of 35, which means that 35
articles in our sample cited it. (2) The Total Global Citations (TGC)
represents how many times an article is cited by other articles that are
available in the entire ISI WOS database. For example, the article by
Kotter and Lel (2011) has a TGC of 36, indicating that 36 other articles,
available in the entire ISI WOS database, cited it. (3) Related to the
above two terms, we have the Total Local Citations per year (TLC/t)
and the Total Global Citations per year (TGC/t). To calculate them, we
divided the TLC and TGC by the number of years. For example, our
sample period ranges from 2005 to August 2019, for a total of 14 years
and 8 months. (4) Finally, the Total Local Citations at the end (TLCe)
represents the total local citations in a specific time frame at the end of
the period. Therefore, this score rewards papers that received more
citations within the last three years. In the case of our study, the last
three years are between January 2016 and August 2019.
In addition, we used VOSviewer software, which utilizes distance-
based mapping techniques to visualize items. This is a more powerful
tool than CiteSpace and Sci2 (Van Eck & Waltman, 2014). It illustrates
networks and clusters in different forms and colors based on citation
data. The clusters are based on the links, the strength of these links and
the strength among the articles (Van Eck & Waltman, 2014).
The details about the analyses we conducted will be described in the
following subsections.
2.2.1. Stage 1: identification of the influential aspects of the SWF literature
We first identified the most influential aspects of the SWF literature
through the HistCite software, such as countries (see Table 3), institu-
tions (Table 3), journals (Table 3), authors (Table 4) and influential
articles and topics (Table 5). The initial analysis showed that 166 pa-
pers in the first dataset were published by 121 journals, written by 264
authors, linked with 216 institutions. These 166 articles had, respec-
tively, 364 and 923 total local (TLC) and global citations (TGC).
2.2.2. Stage 2: co-citation analysis
We identified the commonalities and research streams in the
 Table 2
Sample selection process and identification of keywords through cartographic analysis.
Search word Period Search technique Initial search results Final sample (after Analyses Identification of research Keywords in each stream (cartographic
S. Bahoo, et al.

exclusion) streams (co-citation analysis) analysis)

No. of Citations (ISI
articles WOS)

“Sovereign Wealth 2005 to ISI WOS 265 1287 1661 Meta-Literature Review (i. 1.SWFs' overview and growth Sovereign Wealth Funds, Norway, China,
Funds” August 2019 Bibliometric citation analysis, ii. National Security
Content analysis) 2. SWFs' governance and Sovereign Wealth Funds, Corporate
OR political concerns Governance, Institutional Investors, Ownership,
Transparency Politics
“Sovereign Wealth 2005 to Institutional 18 18 3.SWFs' investment strategies Sovereign Wealth Funds, Determinants, Firms,
Fund” August 2019 Papers Investment, Risk, Performance
2
Total number of articles and citations 283 1287 184

Note: The table presents the sample selection process, final sample size, and keywords identified through cartographic analysis. Final Sample: 184 Consists of: 1first dataset with 166 articles from ISI WOS for bibliometric
analysis, and the second dataset includes the first dataset (166 articles), and 18 institutional papers for content analysis. The table also lists the keywords for each research stream identified through the cartographic
analysis.

4
9
8
7
6
5
4
3
2
1
6
5
4
3
2
1
6
5
4
3
2
1

10

MIT
Rank
Rank
Rank
Table 3

Harvard

Stanford
Tsinghua

School
Institutions5

Missouri
Florida State

University of
University of
University of

Michigan
Virginia Tech

Columbia Law

University
University
University
University
EP
GP

Washington
JCF
EMR
JAPE

EAPA

Influential journals
Influential journals

Influential countries

Influential institutions
Name of journal1

IA

US
UK
JFI
JFE

JEP
JCF

JIBS

Italy
China

TLC: total local citations received.

France
Canada
3
3
4
5
5
5

Norway
Country4

Australia

Singapore
PSWFs

Netherlands
Name of journal2
JP

GP
JFE

JEP
JCF
AMA
Most influential journals, countries and institutions.

Name of journal3

22
22
22
24
32
32
35
35
52
52
TLC
7
7
7
7
8
10
13
14
38
60
1.81
1.81
2.38
3.14
4.33
7.09

PSWFs
7.7

TLC/t
3.43
3.45
5.21
6.33
12.30
TGC/t

on TLC/t, 3 = journals sorted based on TGC/t, 4 = countries sorted based

institutions. 1 = journals sorted based on PSWFs, 2 = journals sorted based

tations received per year, TGC/t: total global citations received per year, and
Note: The table shows the ranking of 6 influential journals, 10 countries, and

on SWFs published by country, author or institution. TLC/t: total local ci-

on PSWFs, and 5 = institutions sorted based on TLC. PSWFs: number of articles
International Review of Financial Analysis 67 (2020) 101418
S. Bahoo, et al. International Review of Financial Analysis 67 (2020) 101418

Table 4
Most influential authors and co-authorship networks.
Rank⁎ Name of author/professor Name of university/institution PSUK TLC TLC/t

1 Nathan Mauck University of Missouri-Kansas City 3 52 6.73

2 Bong-Soo Lee Florida State University 2 39 4.88
3 April Knill Florida State University 2 33 4.36
4 Jason Kotter University of Michigan 1 35 3.89
5 Ugur Lel University of Georgia 1 35 3.89
6 Kathryn L. Dewenter University of Washington 1 32 3.20
7 Veljko Fotak University at Buffalo 2 16 3.2
8 Xi Han San Francisco State University 1 32 3.2
9 Paul H. Malatesta Foster School of Business 1 32 3.2
10 William L. Megginson University of Oklahoma 2 16 3.2
Stream Name of Author/Professor Name of University/Institutions
Blue i- Reuven Glick Federal Reserve Bank, US
ii- Joshua Aizenman University of South California
Red iii-Park, Donghyun Asian Development Bank
i-Hien Thi Kim Nguyen Victoria University Wellington
ii- Yothin Jinjarak Victoria University Wellington
Green i- Hiro Ito Portland State University
ii- Yin-Wong Cheung City University Hong Kong

Note: This table represents the top 10 influential authors and co-authorship networks among authors. The ranking is done based on the total local citations received
per year (TLC/t).

Table 5
Ranking of top 12 influential and trending articles and topics in the literature.
Influential articles/topics1 Trending articles/topics2

Rank Author (s) and year Journala TLC TLC/t Author (s) and year Journala TLC TLCe

1 Kotter and Lel (2011) JFE 35 3.89 Kotter and Lel (2011) JFE 35 17
2 Dewenter, Han, and Malatesta (2010) JFE 32 3.20 Dewenter et al. (2010) JFE 32 13
3 Knill, Lee, and Mauck (2012a) JCF 20 2.50 Bernstein, Lerner, and Schoar (2013) JEP 22 13
4 Knill et al. (2012b) JFI 19 2.38 Knill et al. (2012a) JCF 20 9
5 Johan, Knill, and Mauck (2013) JIBS 13 1.86 Knill et al. (2012b) JFI 19 7
6 Bertoni and Lugo (2014) JCF 11 1.83 Johan et al. (2013) JIBS 13 7
7 Cohen (2009) IA 19 1.73 Aizenman and Glick (2009) IF 12 6
8 Megginson and Fotak (2015) JES 8 1.6 Bertoni and Lugo (2014) JCF 12 6
9 Bortolotti, Fotak, and Megginson (2015) RFS 8 1.60 Gilson and Milhaupt (2009) SLR 15 4
10 Gilson and Milhaupt (2009) SLR 15 1.25 Hatton and Pistor (2011) CJTL 8 4
11 Aizenman and Glick (2009) IF 12 1.09 Cohen (2009) IA 19 3
12 Aguilera et al. (2016) AMP 11 1.22 Yeung (2011) PR 4 3

Note: This table represents the 13 [Editor's note: Is this supposed to be 12?] most influential and trending articles/topics. 1 = The influential articles/topics are sorted
based on TLC/t having a minimum number. 2 = Trending is based on the criterion of a minimum TLCe.
a
The list of journals is provided in Appendix A, Table A1.

Fig. 2. Citation Mapping by HistCite software for 2005 to August 2019. The mapping is the result of the co-citation analysis on 166 articles from ISI WOS. An article
must have minimum value TLC > 1 to be part of the citation mapping, authors calculation.

5
S. Bahoo, et al.
Fig. 3. The figure shows the co-citation analysis through VOSviwer software. The three colors represent the research streams in the literature as a confirmation of
three streams that identified through HistCite software.
Fig. 4. The figure shows the co-authorship analysis through VOSviewer software. The minimum scale for this analysis 1 co-authored paper, author calculations.
literature by conducting a bibliometric co-citation analysis. Co-citation
means that articles cite each other because they belong to the same
concept or topic (Kim & McMillan, 2008). The HistCite software vi-
sualizes the clusters among the articles based on co-citations. The
software accepts bibliometric data as an input and provides outputs in
the form of diagrams and lists of papers. By following Apriliyanti and
Alon (2017), and Fetscherin and Heinrich (2015) we identified three
major research streams (see Fig. 2) using this method. Furthermore, as a
robustness check, we used the VOSviewer software to confirm the
identification of the three research streams (see Fig. 3) in the literature
(Zamore et al., 2018).
2.2.3. Stage 3: co-authorship analysis
We then identified the co-authorship networks among the authors
who are working on SWFs through the VOSviewer software (Liu et al.,
2005; Piette & Ross, 1992). VOSviewer accepts bibliometric data as an
6
International Review of Financial Analysis 67 (2020) 101418
input and provides several types of results, such as co-citations, co-
authorships, and cartographic analysis. Social network analysis has
become quite common in many disciplines. The social network of re-
searchers helps promote their research work. The identification of a
social network of authors related to SWFs will help researchers to
launch future research projects (see Fig. 4 and Table 4).
2.2.4. Stage 4: cartographic analysis
We discovered the keywords for each stream of research by con-
ducting a cartographic analysis through the VOSviewer software (Van
Eck & Waltman, 2010; Zamore et al., 2018). According to Ding,
Chowdhury, and Foo (2001), in a cartographic analysis, articles with
the same keywords are clustered together because keywords describe
content. Fig. 5 provides evidence of three clusters. We used these
keywords for the literature search on SWFs for each stream to analyze
the growth in these areas of study (see Fig. 6). Furthermore, this
S. Bahoo, et al. International Review of Financial Analysis 67 (2020) 101418

Fig. 5. The figure shows the cartography analysis through VOSviwer software. The purpose of the analysis is to identify the keywords under each research stream.
The minimum scale of co-occurrence for a word is 5, author calculation.

analysis confirmed our selection of the keywords to search the litera- manual coding options in NVivo to divide the literature into the defined
ture, because “Sovereign Wealth Fund or Sovereign Wealth Funds” are streams and make them error-free. We explored the origin, concepts,
the main keywords that are repeated most frequently in our sample. classification, and current portfolios of SWFs through this methodology.

2.2.5. Stage 5: content analysis
Finally, we content analyzed 184 articles through the NVivo soft-
ware program. The purpose of content analysis is to explore, verify, and
organize the research streams identified through bibliometric co-cita-
tion analysis (Potter & Levine-Donnerstein, 1999). We carried out the
content analysis using NVivo to make it more systematic and reliable
(Gaur & Kumar, 2018). This software has many options, including the
visualization of the data, text coding, and text analysis. We used the
3. The domain of sovereign wealth funds' research
3.1. The origin of SWFs
The first objective of our study is to explore the origin, concept,
portfolios, and classification of SWFs. In the literature, the first three
funds close to modern SWFs are: (i) the fund for the benefit of the
University of Texas by the U.S. in 1876 (Dewenter et al., 2010); (ii) the

Fig. 6. Growth in literature during the period of 2005 to August 2019. The figure shows the distribution of 184 articles per year, and each research stream, author's
calculation.

7
S. Bahoo, et al.
Kuwait Investment Corporation in 1953 (Boubakri, Cosset, & Grira,
2017) and (iii) the Kiribati Review Equalization Reserve fund by the
British government in 1956 (Lenihan, 2014; Mation, 2016). However,
the concept of modern SWFs was introduced by Rozanov (2005) in his
work, “Who Holds the Wealth of Nations? ” (Aguilera et al., 2016;
Monk, 2009; Wu, 2008).
SWFs attracted the attention of researchers, policymakers and
controlling bodies during the subprime financial crisis after their huge
investments, especially in the banking sector (Megginson & Fotak,
2015; Vasudeva, 2013). The total asset under management of SWFs was
$3.9 trillion in 2008 (Cohen, 2009). By August 2018, the size of SWFs
had almost doubled to $7.67 trillion, with 80 SWFs operating around
the world (SWFI, 2018). SWFs are growing faster than any other in-
stitutional investors (Aizenman & Glick, 2009). For example, as of
December 2017, hedge funds had total asset under management of
$3.211 trillion (HFR - Pensions & Investments, 2017).
3.2. The definition of SWFs
SWFs are generally considered investment vehicles owned and
controlled by governments (Beck & Fidora, 2008; Johan et al., 2013;
Paltrinieri & Pichler, 2010; Wu, 2008). Surprisingly, SWFs are in-
vestigated in the literature without any broader, explicit or generally
accepted definition. In our second dataset of 153 articles, only 14% (20)
defined the term explicitly, while > 65% of published articles (102) did
not define SWFs at all. Furthermore, only 31 articles (21%) defined
SWFs as “government-owned funds.” Using the HistCite software, we
identified the most cited and trending articles through bibliometric
analysis for each research stream, reviewed their content, and com-
bined them to create a broader definition of SWFs. Therefore, through
our technical review, we arrived at the following broad definition of
SWFs:
“Sovereign wealth funds are investment funds that are directly or
indirectly owned, controlled and/or monitored by a government orga-
nization or arrangement (national or sub-national) to stabilize macro-
economic fluctuations due to the imbalance of payments. They can have
multiple objectives, such as stabilization, savings, revenue generation,
and pension payments.”
Our broader definition of SWFs is based on five premises: (1) the
independent arrangements and ownership status, (2) the management
and control status, (3) the source of the funds and their economic ob-
jectives, (4) the nature of the funds' exposure and liabilities, and (5) the
stabilization of the imbalance of payments. The key factors that dif-
ferentiate SWFs from other investors are their independent arrange-
ments, ownership, management, and control systems. They are directly
or indirectly owned and controlled by the government or government
representatives. For example, in the case of the Government Pension
Fund-Global, Norway, the fund is managed by the government in-
directly through a national bank and controlled by the Norwegian
parliament.
3.3. Classification of SWFs
SWFs are classified into two main categories, based on their nature
and source of funding: commodity funds and non-commodity funds,
funded by foreign reserves or by public pension assets (Aggarwal &
Goodell, 2018; Rozanov, 2005). Currently, 44 (55%) are oil or gas
funds, 27 (33%) are non-commodity funds, and 9 (12%) are other types
of funds (SWFI, 2018). SWFs can be divided into five groups based on
the taxonomy of the IMF and the Santiago Principles (Al-hassan,
Papaioannou, & Skancke, 2013): (1) Stabilization funds are established
to support the budget and shield the economy from volatility in com-
modity prices, and internal and external shocks. One example is Russian
SWFs for oil. They resemble the central bank's foreign reserves in their
investment and liquidity goals, but they are different in their attitude
towards risk. (2) Saving funds are established to save wealth for future
8
International Review of Financial Analysis 67 (2020) 101418
generations. One example is the Abu Dhabi Investment Authority. The
main purpose of these funds is to convert non-renewable commodity
assets into diversified financial assets. (3) Development funds have the
core objective of financing socio-economic projects such as infra-
structure. An example is the UAE's Mubadala. (4) Reserve investment
corporations seek to reduce the negative cost of carry and increase the
returns of a high level of foreign reserves. Examples include the China
Investment Corporation and the Korea Investment Corporation. They
mainly invest in equities and alternative investments. (5) Pension re-
serve funds are devoted to ensuring that the government can meet its
obligations regarding the future outflows of money related to pensions.
Such funds exist in Australia, New Zealand, and originally Norway.
These five categories are not mutually exclusive. Some funds have
multiple objectives, such as those in Norway, Australia and Azerbaijan
(Petrova, Pihlman, Kunzel, & Lu, 2011).
4. Influential aspects of the sovereign wealth fund literature
4.1. Top influential countries and institutions
We used the HistCite software to identify influential countries and
institutions. Persian Gulf and Asian countries generally establish SWFs.
However, their establishment and investments have faced criticism
around the world, especially from Western countries (Shih, 2009).
Therefore, it is important to identify which countries and institutions
are studying and analyzing SWFs. We identified the top 10 countries
and institutions based on the number of articles published by authors
affiliated with them (Kim & McMillan, 2008). The list appears in
Table 3.
4.2. Top influential journals and authors
We also used the HistCite software to identify influential journals
and authors to promote their recognition. We determined the leading
six journals in three categories based on the number of articles pub-
lished and the total local citations received per year (Table 3). The top
journals in the three categories are Economic Policy, Journal of Financial
Economics and Academy of Management Annals. We determined the most
influential authors based on the criterion of total local citations re-
ceived per year (Table 4). These lists of top journals and authors will be
helpful for potential researchers seeking to collaborate on future pro-
jects and publications (Van Eck & Waltman, 2014).
4.3. Top influential and trending articles and topics
Using the HistCite software, we also identified influential and
trending articles, based on citations. The literature on SWFs is at a
growth stage. Therefore, it is important to recognize and discuss in-
fluential and trending articles and topics that point potential re-
searchers in specific directions and set the research agenda in the lit-
erature as well. We identified 12 influential and trending papers based
on total local citations received per year and total local citations re-
ceived during the final part of the sample period (January 2016–August
2019). The list appears in Table 5.
5. Citation mapping and visualization of the SWF literature
5.1. Co-citation mapping and visualization
We took two steps to identify the leading research streams in the
literature. First, we conducted a co-citation analysis using the HistCite
software, which yielded the output in the form of Fig. 2. The figure
illustrates how articles cite each other in the literature. In Fig. 2, years
are on the left (y-axis) and the co-citation mapping of the articles is on
the right (x-axis). Circles represent articles, lines reflect the citation
relationships among the articles and the size of the circles shows the
S. Bahoo, et al.
total local citations received by an article (Small, 1999). As a result, 35
articles emerged as the most cited and created Fig. 2.
In the second step, we conducted a detailed content analysis of these
35 articles to identify, explain and confirm their links with each other.
Therefore, we found three major research streams in the literature.
However, four articles (Bahgat, 2010; Kalyuzhnova, 2011; Nilsen,
2010; Reiche, 2010) were not related to any of the three identified
streams.
Additionally, as a robustness check, we conducted the co-citation
analysis again using the software program VOSviewer. This program
accepts bibliometric data as an input and presents the output as a
diagram, which shows the streams in different colors. As illustrated in
Fig. 3, using VOSviewer with the minimum number of citations again
resulted in three research streams (Apriliyanti & Alon, 2017). The ar-
ticles are clustered into three colors: green (SWF investment strategies),
red (SWF governance and political concerns), and blue (overview and
growth of SWFs) that represent the three main research streams in the
literature.
5.2. Co-authorship visualization
We explored the co-authorship network among the researchers who
are working on SWFs through the VOSviewer software. Identifying the
makeup of this network has two important implications. First, potential
researchers can approach these research networks for future projects.
Second, recognizing the researchers who are working on these specific
types of investors is always useful for the growth of any field (see Fig. 4
and Table 4).
6. Review of the research streams in the SWF literature
6.1. Overview and growth of SWFs
This research stream examines the characteristics, overview, ob-
jectives, benefits, drawbacks, and growth of SWFs (Bahoo et al., 2019;
Clarke, 2016; Eldredge, 2019). Monk (2011) maintained that this is an
era of globalization and strong financial markets threaten governments
around the world. In response to these trends, governments or states
have inclined towards state capitalism to safeguard their autonomy and
power. He also reported that the main objective of establishing SWFs is
to preserve the state's autonomy and sovereignty through the power of
finance. SWFs are also used as an investment vehicle for foreign in-
vestments under state capitalism (Cazurra, Inkpen, Musacchio, &
Ramaswamy, 2014).
Governments create SWFs for two reasons. The first is political, to
accomplish local and international political objectives. The second is
related to the economic growth and development of the country
(Lenihan, 2014; Wu & Seah, 2008). Hatton and Pistor (2011) argued
that the autonomy maximization theory provides an excellent ex-
planation for the motivations behind the formation of SWFs, especially
in the case of four SWFs—Kuwait, Abu Dhabi, Singapore, and China.
However, another view is that SWFs are established to become key
drivers in the international entrepreneurial economy (Bostan & Ergen,
2017) and are currently in fashion (Amar, Lecourt, & Kinon, 2018).
Similarly, Eldredge (2019) claimed that mid-level economic powers are
more likely to create SWFs to shield themselves from external risk.
SWFs are key and prominent players in the international financial
markets, and their role as drivers of economic growth and stability will
increase (Beck & Fidora, 2009). Currently, 80 SWFs are operating
around the world, with assets under management of $7.67 trillion
(SWFI, 2018). As a result of their growth, Clarke (2016) described a
new type of SWF investment vehicle, sovereign patent funds (SPFs),
which is growing in China and Japan. Recently, Bahoo et al. (2019)
introduced a model of Islamic SWFs whose goals are to increase the
9
International Review of Financial Analysis 67 (2020) 101418
impact of SWFs on the economies of Muslim countries.
Several researchers examined the costs of SWF. Bahgat (2010) noted
a number of SWF shortcomings, such as poor disclosure, lack of proper
management, the poor performance of public assets and the lack of
integration with the country's fiscal policy. Meanwhile, Kirshner (2009)
discussed some major drawbacks and pointed out that these funds are
politically biased, resulting in a geopolitical problem due to the shifting
of wealth in international financial systems. Machado E Silva and
Medeiros Costa (2019) focused on the legal structure of Norwegian
SWFs compared to Brazilian SWFs, and argued that the implementation
of the Norwegian structure would be helpful for the Brazilian funds.
The literature also identifies several benefits of SWFs. The role of
the state in global economic policy has deepened, particularly due to
SWFs. Originally established to boost the national economy, their im-
portance is increasing daily (Bostan & Ergen, 2017). These SWFs have
become the driver of the entrepreneurial economy. Moreover, SWFs are
long-term investors with minimal leverage, giving them a stabilizing
effect on the liquidity and growth of financial markets (Butt,
Shivdasani, Stendevad, & Wyman, 2007; Keller, 2008). These factors
result in a reduction in the risk of financial crises (In, Park, Ji, & Lee,
2013).
Finally, a number of researchers and policymakers have explored
and analyzed the individual characteristics of multiple SWFs through
case studies or “in-depth studies.” Examples include Malaysia's
Khazanah Nasional (Lai, 2012); Vietnam's State Capital Investment
Corporation (SCIC) (Nguyen, Nguyen, & Nguyen, 2012); Australia's
Future Fund (Eccleston, 2012); the National Fund of the Republic of
Kazakhstan (NFRK) (Kalyuzhnova, 2011); Saudi Arabia's Public In-
vestment Fund (PIF) (Seznec, 2016); the Korea Investment Corporation
(Paltrinieri, Pichler, & Miani, 2014b); the Abu Dhabi Investment Au-
thority (ADIA) (Abdelal, 2009); the China Investment Corporation
(CIC) (Wu & Seah, 2008); and the Government Pension Fund-Global,
Norway (Fini & Rethel, 2013). We summarized these studies in Table 6.
6.2. SWFs' governance and political concerns
SWFs' governance and political concerns are the second identified
research stream in the literature. Primarily, the focus of this research
stream is on the poor governance mechanisms of SWFs and their poli-
tical biases, especially in cases where undemocratic governments es-
tablish these funds. In 1993, Keynes argued that international cash
flows are political. A prime issue is that SWFs are politically biased,
have a low standard of governance and are typically created by un-
democratic governments (Cohen, 2009; Gilson & Milhaupt, 2009;
Paltrinieri, Pichler, & Miani, 2014a). Policymakers from Western
countries are concerned about large investments by SWFs and their
non-economic objectives (Gilson & Milhaupt, 2009). Therefore, at the
G-20 summit in 2008, the Santiago Principles for SWFs were presented
and the International Forum of Sovereign Wealth Funds (IFSWF) was
established. Norton (2010) explored the multi-level governance of
SWFs as a result of the implementation of the Santiago Principles and
its impact on global financial markets.
In the context of governance, Truman, a leading expert on SWFs,
argued that the international standards of SWFs should be based on
several key pillars (Truman, 2007b) and presented the Truman gov-
ernance scoreboard based on the Santiago Principles (Truman, 2008).
Bagnall and Truman (2013) updated the scoreboard. They evaluated
SWFs through their scoreboard and compared their findings with the
scorecard the IFSWF created for a survey. Furthermore, Truman
(2007a) maintained that SWF investment is not a threat for the U.S.,
and the American government should allow them but emphasize best
governance practices.
Researchers have also critically reviewed the political concerns re-
lated to the establishment (Braunstein, 2016; Chwieroth, 2014),
 Table 6
Summary of key papers in each stream.
Authors (year)
First stream: SWFs' overview and growth
Bahoo et al. (2019)
Eldredge (2019)
Machado E Silva and Medeiros
Costa (2019)
Amar et al. (2018)
Clarke (2016)
Lai (2012)
10
Nguyen et al. (2012)
Eccleston (2012)
Kalyuzhnova (2011)
Seznec (2016)
Abdelal (2009)
Wu and Seah (2008)
Fini and Rethel (2013)
Second stream: SWF governance and political concerns
Braunstein (2019)
Grira, Labidi, and Rouatbi
(2018)
Type of paper Objective/research question Methods (technique/sample of Main findings
S. Bahoo, et al.
(empirical or study/data sources)
qualitative)
Qualitative • Presented a model of Islamic Sovereign Wealth Funds • Descriptive case study and • ISWF model based on the following pillars; (i) the major Shariah principles;
(ISWFs). content analysis (ii) the Islamic corporate governance framework; (iii) the Islamic
• Eight SWFs from Muslim transparency and disclosure framework; (iv) the Islamic corporate social
countries as case setting. responsibility framework.
Quantitative • Why do countries create SWFs? • Cox's proportional hazards • Middle economic powers that are highly exposed to global trade and capital
model markets are more likely to create SWFs.
• 482012SWFs between 1950 and
Qualitative comparison of the legal structure of Brazilian SWFs and • Qualitative case study • The Brazilian SWFs can improve its governance and output by following the
• ANorwegian SWFs SWFs and legal structure of the Norwegian SWFs.
• Brazilian
Norwegian SWFs
Quantitative • Is the emergence of SWFs a fashion? • Panel data analysis • The factors driving SWF creation are different depending on the origin of
• 37 countries established SWFs the funding (commodity or non-commodity) and the macroeconomic
objective(s) of the fund.
Qualitative • An overview of sovereign patent funds (SPFs) • Content analysis • Presents an overview of SPFs and compares them with traditional SWFs.
• Industrial economics; France,
South Korea, and Japan.
Qualitative • An overview of Malaysia's Khazanah Nasional • Content Analysis • Malaysian SWFs were established in 1994 and remained under government
• Malaysia SWFs. control. However, now the fund has become more transparent, aggressive
[Editor's note: Do you mean attracting?] investors internationally, and also
started reporting to the general public due to the change in the democratic
government.
Qualitative • An overview of Vietnam's State Capital Investment • Content Analysis` • Vietnam's SWFs were established in 2005 with the main objective of
Corporation (SCIC) • Vietnam's SWFs supporting the under-market conditions and promoting state-owned
enterprises. However, their effect on the market-oriented economic system
needs time to be evaluated.
Qualitative • An overview of Australia's Future Fund (AFF) • Content Analysis • Australian SWFs were established in 2006 to meet the government's future
• Australia's SWFs public service pension liabilities.
Qualitative • An overview of the National Fund of the Republic of • Content Analysis • Kazakhstan's SWF has the primary objective of stabilizing the economy and
Kazakhstan (NFRK) • Kazakhstan's SWFs savings.
• The NFRK performed well in saving the economy during the financial crises of
2007–2009.
Qualitative • An overview of Saudi Arabia's Public Investment Fund • Content Analysis • The Saudi government wants to transfer the leading oil company, Saudi
(PIF) • Saudi Arabia's SWFs Aramco, to SWFs. This will be a major step in shifting the Saudi economy
from oil to other sectors.
Qualitative • An overview of the Abu Dhabi Investment Authority • Content Analysis • Abu Dhabi is an oil export economy, and the country's wealth is managed
(ADIA) and the Mubadala Development Company (MDC) • ADIA and MDC SWFs through these two SWFs.
Qualitative • An overview of the China Investment Corporation (CIC) • Content Analysis • Established in 2007 with an initial capital of US $200 billion.
• China's SWFs • In the U.S., there are two views; (i) requires firm rules and regulations related
to their governance and improve accountability and transparency; (ii) there
should be a voluntary defined code of conduct for the governance behavior.
Qualitative • An overview of Government Pension Fund-Global (GPFG) • Content Analysis • The Norway SWF was established in 1990 with the dual objective of
• Norway's SWFs stabilization and savings. This fund was managed by Norges Bank
Investment Management (NBIM).
• This is the world's most transparent SWF.
Qualitative • What are the domestic drivers behind SWF creation, and • Qualitative case study • There are systematic links between the types of sovereign funds and
how does a country's domestic political environment affect • GCC SWFs domestic structures; these structures include and exclude socio-economic
the creation of these funds? factors that influence policy-making decisions.
Quantitative • What is the impact of political risk on the decision making • Panel data analysis • Political risks have a strong impact on the investment decisions of SWFs.
of SWFs?
International Review of Financial Analysis 67 (2020) 101418
(continued on next page)
 Table 6 (continued)
Authors (year)
Aggarwal and Goodell (2018)
Wang and Li (2016)
Knill et al. (2012a)
Chwieroth, 2014
Truman (2008)
Truman (2007b)
11
Third stream: SWFs' investment strategies
Dewenter et al. (2010)
Heaney, Li, and Valencia
(2011)
Bortolotti et al. (2015)
Bertoni and Lugo (2014)
Næss (2017)
Gangi, Meles, Mustilli,
Graziano, and Varrone
(2019)
Type of paper Objective/research question Methods (technique/sample of Main findings
(empirical or study/data sources)
S. Bahoo, et al.
qualitative)
Quantitative • What is the impact of the national culture on the • Panel data analysis • SWF governance is associated with the cultural dimensions of power
governance of the SWFs? • 49 SWFs distance, individualism, and most likely masculinity; better SWF
governance is associated with a long-term orientation, indulgence, and
uncertainty avoidance.
Quantitative • The relationship between SWFs governance, democracy, • OLS regression • SWFs' institutionalization depends on the political regime of the nation and
and veto players. • 46 SWFs from 30 countries the number of veto players in policymaking.
• Democracy promotes SWF institutionalization, and a moderate number of
veto players is supportive of good governance.
Quantitative • What is the effect of political relations on the SWFs' • Several statistical tests • SWF investment decisions depend on the political relations with host
investment? countries.
• SWF investment decisions are at least partially political biased.
Quantitative • IsRoleSWFof creation fashion or a fad? • Cox's proportional hazard • The decision to create SWFs is closer to a fashion in that countries follow
• political economy in creating SWFs. model their peers after developing and accumulating foreign reserves.
• 158 countries
Qualitative • Presented Truman's governance scorecard for SWFs • Qualitative analysis scorecard is based on 33 points divided into 4 categories; (1) overview
• Thefund (structure, objective and separation from country's foreign
• 54 SWFs and 10 pension funds ofreserves); (2) governance of fund (role and responsibilities of government
and fund managers); (3) accountability and transparency of fund
(investment objectives, methods, operations and strategies); and (4)
behavior of fund (managing the portfolio and operations).
Qualitative • An overview of governance standards of SWFs • Content analysis • International governance standards of SWFs should be based on the
following four points; (1) objectives and investment strategy, (2)
governance, (3) transparency, and (4) behavior.
Quantitative • What is the impact of SWF investment and divestment on • Regression analysis • SWFs' acquisitions produce, on average, a 1.5% increase and − 1.4%
firms' value? • US firms' 227 acquisitions decrease in the abnormal returns of targeted firms in an event of investment
• Period: 1987–2008 and divestment.
Quantitative • What is the effect of Singapore's SWFs' investment on • Regression analysis • Fund prefers to invest in those firms that have a small number of directors
domestic firms? • 150 Singapore firms and block-holders.
• Period: 2000 to 2004 • Fund provides reasonable compensation schemes to directors to promote the
firm's performance.
• Fund provides incentives to the firms by reducing their systematic risk
through investments.
Quantitative • Comparison of the effect of SWF investment on private and • Propensity-score-weighting • SWF investments have a positive effect on public firms but less than private
public firms. techniques firms.
• 1018 investment acquisitions
by SWFs
• Period: 1980–2012
Quantitative • What is the effect of SWF investment on the credit risk of • 391 firms' acquisitions • On average, CDS' spread of target companies decreases following an SWF
the targeted companies as measured by the change in their • Period: 2003–2010 investment.
credit default swap (CDS) spreads? • The reduction in the CDS spread is greater when the SWF is established by a
politically stable non-democratic country that has a neutral political
relationship with the host country of the target company.
Qualitative • An investment contract between the Norwegian Oil Fund • Case study • Transparency issues with the Russian Grand Prix and Delta Topco
and the Russian Grand Prix and transparency issues. • Norwegian Oil Fund • Raised questions about the Oil Fund's ethical guidelines and council.
• Russian Grand Prix a result, Ness argued that a new set of examination methods by the Council
• Asof Ethics might be warranted.
Quantitative • Do the determinants and effects of SWFs' investments vary • Panel data analysis • The savings and reserve funds and non-commodity funds pick better-
across types of funds? • Firm-level data performing firms.
• Period: 2000–2016 • Effects vary among SWF categories.
• The savings and reserve funds assume a passive role in managing investments.
• The multi-objective and development funds that have detrimental effects on
the target companies.
International Review of Financial Analysis 67 (2020) 101418
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S. Bahoo, et al. International Review of Financial Analysis 67 (2020) 101418

fund and its Finance Ministry manage the money of its people properly.
prefer to invest in countries that are politically stable, less democratic

is a lack of data with which to examine SWFs and determine whether

governance (Bagnall & Truman, 2013; Grira et al., 2018; Truman,

factors do not have the same impact on investment decisions.

inconsistently across countries, resulting in a misleading understanding of

are opportunistic investors concerning the amounts to be invested.

SWF returns increased from 3.1% to 4.9%, implying positive

2007b, 2008; Wang & Li, 2016) and investments (Braunstein, 2019;

date, SWFs have acted as rational, economically driven investors,

Calluzzo, Dong, & Godsell, 2017; Grira et al., 2018; Knill et al., 2012a)

they are relatively international investors or have a large impact on

their portfolios by asset class and geographic region.
of SWFs. Furthermore, researchers have explored the association be-

inaccurately calculate their size by their counting assets

tween SWF governance and their investment decisions and democracy,
political relations (Hatton & Pistor, 2011; Knill et al., 2012a; Wang & Li,
2016) and political risk (Aggarwal & Goodell, 2018). In particular, the
U.S. and other developed countries have discouraged or banned in-
vestments from the China Investment Corporation (CIC) due to several
political concerns (Wu & Seah, 2008). The general view of SWFs is that
they are politically biased, have poor governance and are established by

fund operates like mutual funds.

undemocratic governments.

results related to SWF portfolios.

international financial markets. Contrary to this opinion, Norway's Government Pension Fund-
Global (GPFG) is the world's largest SWF, and it appears to be the most
and more financially open.

transparent. It received a score of 72 out of 100 on Truman's (2007b)

scoreboard and was cited for best practices. The fund generated a
13.66% return or 1028 billion NOK in 2017 and also reached another
milestone of $1 trillion in 2017 (SWFI, 2018). The governance me-
• Country-level

• Todiversifying

• Norwegian

chanism of GPFG consists of two layers: accounting principles such as

Main findings

their size.

the Santiago Principles and GAAP, and ethical principles set by the
• There
• SWFs
• SWFs
• SWFs

• The
• The

Ministry and the Norwegian Parliament (Clark & Monk, 2010). The
normative and regulatory impact of the fund's governance of targeted
firms is also considerable and positive (Vasudeva, 2013).
analysis

• world SWFs around the

Nevertheless, overall, SWFs are criticized for their poor governance

SWFs around the world
Methods (technique/sample of

dynamic Tobit

and political motivations (Shih, 2009) regarding their operations

equation ex-post
• Qualitativeacquisition

(Cohen, 2009; Kratsas & Truby, 2015) and investment strategies

• Examines allstudy

Norwegian SWFs

• Norwegian SWFs

(Kamiński, 2017; Knill et al., 2012b). However, there is a need to ex-

study/data sources)

root test

tend this research stream to improve the governance of SWFs by

panel model
• Two-tiered
• 15Firm-level

minimizing political concerns.

• United
• Fisher

6.3. SWF investment strategies

•

Articles about SWF investment strategies constitute the bulk of the

do SWF investments impact international finance and

a methodology for calculating the real returns of

research studies in the literature. Most of these articles focus on cor-

do country-level factors affect SWFs' investment

porate finance and portfolio management, specifically, the effect of

SWF investment and divestment on a target firm's value, performance
and risk.
Overall, the academic literature shows that there is a positive as-
• Portfolio analysis of Norwegian SWFs.

sociation between SWF acquisition and a target firm's value, perfor-

mance and risk (Bertoni & Lugo, 2014; Bortolotti et al., 2015; Fotak,
Bortolotti, & Megginson, 2008; Gangi et al., 2019; Heaney et al., 2011;
Johan et al., 2013; Kotter & Lel, 2011; Urban, 2016). SWFs are con-
Objective/research question

sidered to be large shareholders when they take a long position in

targeted companies (Dewenter et al., 2010). Along with state-owned
enterprises (SOEs), SWFs are associated with higher returns for targeted
investment?

Note: The table summarizes the key papers in each research stream.

firms (Karolyi & Liao, 2017). However, contrary to these contentions,

decisions?

• Presents

Gasparro and Pagano (2010) argued that financial crises and invest-
SWFs.
• How

• How

ments from SWFs have negative effects on the returns of European and
American firms. SWFs can expropriate the funds of minority share-
holders by using their voting power to transfer the firms' assets to
foreign countries (Kotter & Lel, 2011).
The vast majority of studies maintain that SWF investments are
associated with political connections (Bernstein et al., 2013; Calluzzo
Type of paper
(empirical or

Quantitative

Quantitative

Quantitative

et al., 2017; Kamiński, 2017). For example, researchers have examined

qualitative)

Qualitative

and analyzed SWF investments in the U.S. during the political election
process (Calluzzo et al., 2017; Sun, Li, Wang, & Clark, 2014). Similarly,
acquisitions made by Chinese SWFs are a threat for European energy
companies (Kamiński, 2017) and for firms involved in American elec-
Amar, Candelon, Lecourt, and

Benedictow and Boug (2017)

tion campaigns (Calluzzo et al., 2017). As a result, these SWFs relin-

Caner and Grennes (2010)

quish their long-term benefits for short-term goals and tend to invest
Table 6 (continued)

domestically (Bernstein et al., 2013). However, Johan et al. (2013)

considered SWFs to be genuine activist investors like private or public
Xun (2019)

Balding (2008)
Authors (year)

pension and mutual funds. In general, the view that SWFs play a role in
stabilizing, growing and developing the economy is widely accepted
(Benedictow & Boug, 2017; Ciarlone & Miceli, 2016; Truman, 2007a).
Researchers have also explored the portfolio choices of SWFs and

12
S. Bahoo, et al.
drawn multiple conclusions (Aizenman & Glick, 2010; Al-hassan et al.,
2013; Balding, 2008; Benedictow & Boug, 2017; Caner & Grennes,
2010; Petrova et al., 2011). Due to economic conditions and falling
interest rates, SWFs have started to adjust their investment portfolios in
terms of asset allocation, geography, and sectors. The investment stra-
tegies of SWFs have been explored in multiple innovative and varied
directions (Boubakri et al., 2017; Debarsy, Gnabo, & Kerkour, 2017;
Miceli, 2013). For example, Miceli (2013) examined the concept of
herding across industries for SWF asset allocation. He showed that
herding behavior has almost no effect on SWFs. Debarsy et al. (2017)
investigated SWF investment behavior and the trend of spatial depen-
dence, that is, making an investment decision in one country at the
expense of another country. They reported that SWFs do not follow the
trend of spatial dependence in asset allocation decisions. Boubakri et al.
(2017) explored the effect of SWF acquisitions on the intra-industry of
the targeted firms by considering the competitors of these companies
using an event study framework. They concluded that SWF investments
have a positive effect on the risk-adjusted average cumulative abnormal
returns (CAR) of the competitors of target firms. Similarly, Megginson,
You, and Han (2013) extended this research question about the char-
acteristics of the targeting firms' country by exploring the country
characteristics of both the SWFs and the targeted firms. They found that
if the SWFs belonged to countries that had less developed local markets,
but were open to trade and had strong economic performance, they
tended to make more cross-border investments. In addition, SWFs found
targeted firms that belonged to countries with developed capital mar-
kets and protection for investors more attractive for investment.
Finally, as is true for other investors, SWF investment strategies,
specifically, asset allocation, depend on the choice of the vehicle.
Murtinu and Scalera (2016) explored the SWFs' choice of investment
vehicles as passive investors. The authors showed that fund opacity,
politicization, strategic industry targets, and majority ownership
choices lead to a more likely use of vehicles, while bilateral trade
agreements negatively affect this strategy. The authors also demon-
strated that politicized foreign SWFs are more likely to invest through
vehicles located in third countries. We summarize the key papers in
Table 6.
7. The growth of the SWF research streams through cartographic
analysis
The presentation and analysis of the growth of the various research
streams investigating SWFs are important. To indicate their growth, we
used cartographic analysis (Apriliyanti & Alon, 2017) to identify the
keywords in each stream and also present them in Table 2. We then
used these keywords to assess the growth of the literature in each re-
search stream in our sample period. We illustrate the growth of the SWF
literature in Fig. 6.
8. Future research questions
8.1. Overview and growth of SWFs
Little is known about the emerging type of SWFs called “sovereign
patent funds,” which are currently used by advanced economies, such
as France, South Korea, and Japan (Clarke, 2016). It will be interesting
to review and explore the characteristics, functionality, merits, and
disadvantages of these investment vehicles. Another important area to
explore is identifying the main country-level characteristics that lead a
nation to establish SWFs. One example is China's decision to deal with
the governance of food security by creating an SWF. We recommend
using a comparison to determine whether state capitalism or varieties
of capitalism is the best approach to ensuring food security.
13
International Review of Financial Analysis 67 (2020) 101418
8.2. SWF governance and political concerns
Policymakers in host countries and controlling bodies often regard
SWF investment as a threat to security. In the literature, there is no
defined minimum standard of a tradeoff between the economic and
political goals of SWFs. Having reviewed the management of SWFs, it is
also questionable whether, given their control by the government, they
can achieve their economic targets. An analysis of the principal-agent
relationship between the government, which owns the SWFs, and the
managers who manage them is necessary. Furthermore, a debate is
required about whether there should be some compulsory minimum
standard of disclosure for SWFs, as there is for other private mutual or
hedge funds. On the other hand, SWFs become part of the board of
directors in targeted firms and can access very secret information.
Therefore, we strongly recommend that European policymakers estab-
lish standards regarding the involvement of foreign investors such as
SWFs in the decision making of target companies and appoint a legal
body or institute to control and monitor these standards.
8.3. SWF investment strategies
There is no full consensus regarding the effect of SWF investment on
the performance, value, risk, and governance of target firms. It will be
very interesting to explore the effect of SWF investment with regard to
these issues in the short and long runs. Such an exploration should be
conducted on a country-by-country basis before attempting to draw
general conclusions. It will be useful to compare the effect of SWF in-
vestment with that of other institutional investors, such as pension and
mutual funds. A review of the role of SWFs in the economic stability of
the home countries that own the SWFs and the host countries that re-
ceive their investment is also essential. SWFs are used as a bailout tool
by the home countries, especially during financial crises. Therefore, we
must explore the association between the bailout policy and the
availability of deposit insurance schemes at the country level.
Regarding SWF portfolios, we suggest analyzing the theoretical
portfolio construction for different types of SWFs with regard to their
funding sources and objectives. We strongly recommend examining and
critically analyzing the performance of SWF portfolios in terms of their
risks and returns, while considering their investment strategies in
multiple industries (such as farmland, timberland, energy, and real
estate) and geographic regions (Asia, Europe, and America). SWF in-
vestment decisions regarding foreign direct investment and the choice
of investment vehicles, whether directly or indirectly through private
firms, are another important area of study. The investment strategy of
SWFs as active or passive investors and their source of capital is an
essential future research direction. The review and comparison of the
investment strategies of two main types of SWFs—sovereign pension
reserve funds (SPRFs) and social security reserve funds (SSRFs)—with
institutional investors, such as public or private pension funds, mutual
and hedge funds will be a welcome addition to the literature (Dreassi,
Miani, & Paltrinieri, 2017). Finally, the debate about political risk and
SWFs is growing in the literature, making it important to examine the
role and effect of political risk on SWF investment strategies and the
asset allocation of their portfolios. Table 7 lists the gaps in the literature
in these three research streams in the form of 20 future research
questions.
9. Conclusion
To the best of our knowledge, this is the first study to utilize qua-
litative (content analysis) and quantitative (bibliometric citation ana-
lysis) techniques to conduct a meta-review of the SWF literature. We
analyzed a total of 184 articles—166 listed on the ISI Web of Science
and 18 influential institutional papers—written over the last 14 years.
S. Bahoo, et al. International Review of Financial Analysis 67 (2020) 101418

Table 7
Future research questions.
Research Streams Future Research Questions

SWFs' overview and growth
SWFs' governance and political concerns
SWFs' investment strategies
1 What are the key activities and characteristics of the new sovereign patent funds (SPFs) compared to conventional SWFs?
2 Which is a better approach, state capitalism (SC) or varieties of capitalism (VOC), for food security governance?
3 What role could SWFs play in food security governance in developing countries facing food scarcity issues?
4 What characteristics of the country (such as large foreign reserves, a commodity-based economy, and an aging people) lead to the
establishment of SWFs by that nation?
5 What should be the standard mechanism for determining the tradeoff between the political and economic objectives of SWFs?
6 Are state-owned SWFs' management practices good enough to achieve their goals, and would it be helpful to improve their
governance?
7 What should be the standard of fair rules & regulations regarding the involvement of SWFs in the decision-making process and
access to the secret information of target companies? Who will monitor these rules & regulations? These issues are important for
companies that deal in sensitive industries that have national implications, such as the European energy market and nuclear
energy.
8 What should be the appropriate optional and mandatory levels of disclosure for SWFs, similar to those required for other private
mutual funds or hedge funds?
9 What is the principal-agent relationship in terms of governance mechanisms between the managers (the people of the country
managing the funds) and the owners (the governments or states) of SWFs?
10 What is the effect of political risk (variables) on the internal governance system of SWFs?
11 What is the effect of SWFs' investments on the target firm's financial performance and credit risk? What is the role of the country
and firm-level factors in this association?
12 What is the effect of SWFs' investments on the target firm's stock price in the short and long runs?
13 What is the magnitude of the effect of SWFs' investments compared to those of other investors such as private and public
institutional investors on the target firm's performance and credit risk?
14 What is the role of SWFs in the economic stability and growth of the home country that owns the SWFs and the host country that
received their investments, and overall in the global financial system?
15 Is there a nexus between SWF bailout investments and deposit-insurance system schemes, and is there any pressure on the
governments of SWFs to use them as a bailout policy in case of the non-availability of deposit insurance schemes, especially
during financial crises?
16 What is the effect of the SWFs' investment strategies on their portfolio performance (risk and return) in various industries
(timberland, farmland, real estate, and energy) and geographical regions (Asia, Europe, and America)?
17 What are the factors that lead to SWFs' foreign direct investment and choice of investment vehicles, specifically, whether they
should invest directly or through private firms, and what is the effect of these two options on their portfolios?
18 What type of investment strategy do SWFs use, such as active vs. passive? What are their sources of capital? What types of SWFs
(such as commodity or non-commodity) follow which specific policy?
19 Do sovereign pension reserve funds (SPRFs) and social security reserve funds (SSRFs) have the same investment strategies as
other institutional investors such as public or private pension funds, mutual and hedge funds?
20 What is the role and effect of political risk (variables) on SWF investment strategies, and what is the overall effect of political
influence and internal or external governance in SWFs' asset allocation?

Note: The table shows 20 future research directions, identified by the authors through the meta-literature review.

We used the HistCite and VOSviewer software programs for the bib-
liometric analysis. We also conducted the following analyses in our
meta-literature review: (i) identification of the influential aspects of the
literature, (ii) co-citation analysis, (iii) co-authorship analysis, (iv)
cartographic analysis, and (v) content analysis.
This study makes multiple contributions to the research in the area
of SWFs. First, we discuss the origin and categories of SWFs, and use
this information to create a broader definition of SWFs. Second, we
identify the leading countries, institutions, journals, authors, and in-
fluential and trending articles and topics related to SWF research.
Third, we identify three main research streams in the literature: (i) the
overview and growth of SWFs, (ii) SWF governance and political con-
cerns, and (iii) SWF investment strategies. Fourth, we illustrate the co-
authorship network of researchers in this area and recognize influential
authors as well, which is essential for the growth of any field. Fifth, we
present the growth of the literature in each steam and identify 20 future
research directions.
We also present some policy recommendations and concluding re-
marks based on our in-depth meta-literature review. First, the overall
literature agrees that SWFs function as true active investors whose goal
is to increase their portfolios' returns rather than advance a political
agenda. Second, many scholars recommend establishing controlling
bodies to balance the economic and political objectives of SWFs and
ensure that this balance is maintained. Third, we find several scholars
reporting that SWF governance mechanisms have improved. Therefore,
policymakers should encourage SWFs to make more investments.
The possible limitations of the study are related to the bibliometric
citation analysis. The analysis focuses on frequently cited articles, and
the software may ignore some quality research articles due to their not
being cited (Apriliyanti & Alon, 2017). We covered a large range of
literature up to August 2019, but recent articles need time to be cited.
Therefore, we recommend applying this technique again several years
from now. In addition, we used only one database for bibliometric ci-
tation analysis because the HistCite software is designed to deal only
with ISI WOS. Therefore, we recommend conducting a bibliometric
citation analysis of SWFs by considering other databases such as Google
Scholar and Scopus, subject to the availability of the appropriate soft-
ware.

14
S. Bahoo, et al. International Review of Financial Analysis 67 (2020) 101418

Appendix A

Table A1
Abbreviations used for journals.

Abbreviation Name of journal Abbreviation Name of journal

JFE Journal of Financial Economics CJTL Columbia Journal of Transnational Law

IF International Affairs CWE China & World Economy
JFI Journal of Financial Intermediation EN Energy
SLR Stanford Law Review AEPR Asian Economic Policy Review
JCF Journal of Corporate Finance ISQ International Studies Quarterly
JEP Journal of Economic Perspectives JES Journal Of Economic Surveys
IF International Finance ESP Environmental Science & Policy
TTIBG Transactions of The Institute of British Geographers WE World Economy
JIBS Journal of International Business Studies GP Global Policy
FA Foreign Affairs AJM Australian Journal Of Management
NYULR New York University Law Review EP Energy Policy
EAPA Environment and Planning A QF Quantitative Finance
UCLR University of Chicago Law Review OS Organization Science
JIEL Journal of International Economic Law JFR Journal of Financial Regulation
TIBG Transactions of The Institute of British Geographers RFS Review of Financial Studies
JAPE Journal of The Asia Pacific Economy IA International Affairs
EBOLR Europe Business Organization Law Review AMA Academy of Management Annals
GP Geopolitics AMP Academy of Management Perspectives
PR Pacific Review JIMF Journal of International Money and Finance
GP Global Policy JAPE Journal of The Asia Pacific Economy
EMR Emerging Market Review

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