Macroeconomic Uncertainty and Managing Risk for Sovereign Wealth Funds

Oliver Fratzscher

in Sovereign Wealth Funds and Long-Term Investing

Published by Columbia University Press

Published in print November 2011 | ISBN: 9780231158633
Published online November 2015 | e-ISBN: 9780231530286 | DOI:
Macroeconomic Uncertainty and Managing Risk for Sovereign Wealth Funds

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This chapter addresses macroeconomic uncertainty and risk management for sovereign wealth funds (SWFs) based on policy experience and more recently from the perspective of a long-term investor. The chapter raises six simple questions. First, does SWF governance hinder performance during times of high uncertainty? Is it possible that the performance becomes a short-term political benchmark? Second, is it possible that SWFs perform worse during crises, whereas hedge funds perform better and take the lead or take the relief from SWFs? Third, could SWFs benefit from broader diversification rather than just narrow hedging? Fourth, are SWFs natural targets for governments to resolve crises? Fifth, is it true that SWFs are slow followers to adjust to mean-reverting asset prices? Finally, can SWFs benefit from sustainable investments in emerging markets?

Keywords: macroeconomic uncertainty; risk management; sovereign wealth funds; SWF

Chapter.  979 words. 

Subjects: Financial Markets

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