Yingqi Wei: The topic of this paper is important because sovereign wealth funds (SWFs) have emerged as major investors worldwide. The quasi-public nature of these funds has unique implications for their investment objectives. Although most SWFs claim that their objective is the long-run maximum of financial returns, as clearly identified in the paper, SWFs are exposed to political influences (e.g., being ordered to assist domestic financial system rehabilitation). It is therefore imperative to have a model that formulates a multiple-goal investment framework for SWFs. The paper applies the model to China only. Its empirical relevance, however, can be extended to SWFs of other countries.
The paper begins with stylized facts about SWFs and China's economy to set the scene. This is followed by the formulation of the multiple-goal SWF investment framework through the integration of the mean variance mental accounting framework of Das et al. (2010) and the Black-Litterman model....