Being “built differently” makes sovereign wealth funds misunderstood but also makes them more innovative, says Scott Kalb.
Key Points
Compared with institutional investors, the mandate of sovereign wealth funds (SWFs) “gives them a better opportunity to diversify their investments” and a greater ability to innovate.
SWFs have experienced massive growth of assets in recent years, but “if this challenging economic environment continues for another two or three years, then all bets are off.”
Misunderstandings about SWFs and suspicions of their aims pose problems.
Introduction
With more than 90 funds managing US$9 trillion, sovereign wealth funds (SWFs) are among the world’s largest and most innovative investors. They’re also among the most widely misunderstood, according to Scott Kalb, executive director of Sovereign Investor Institute and formerly the chief investment officer of Korea Investment Corporation. Whereas many people believe SWFs are driven by political aims, he points out that the primary purpose of SWFs “is actually to protect capital from political influences.” In this interview with CFA Institute Magazine, Kalb explains inaccurate perceptions regarding sovereign wealth funds, the new collaborative models for SWF investment, how falling oil and commodity prices are affecting these funds, and why sovereign funds are uniquely “built” for innovation.