Sovereign Wealth Fund Investment in Venture Capital, Private Equity, and Real Asset Funds

Center for Financial Studies Working Paper No. 700, 2023

63 Pages Posted: 24 Feb 2023

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University; European Corporate Governance Institute (ECGI)

Pedro Monteiro

University of Scranton - Kania School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: October 24, 2022

Abstract

This paper examines the performance of 538 sovereign wealth fund (SWF) investments into venture capital, private equity, and real asset funds (“alternative asset funds”) from 52 countries around the world over the years 1995-2020. The data indicate SWFs are significantly slower to fully liquidate and earn lower returns from their investments, particularly from their investments in venture capital funds. The longer duration and lower performance of SWFs is more pronounced for strategic SWFs than savings SWFs. We show that venture capital fund investments are more likely to be in countries with lower quality disclosure indices. SWFs are more often in buyout funds, and in larger funds with a greater number of limited partners. SWF performance is enhanced by having different types of institutional investors in the same limited partnership. Overall, the data indicate sovereign wealth funds make large investments in alternative asset funds with a longer-term view and earn a lower financial return consistent with strategic and political SWF investment motives.

Keywords: Sovereign wealth funds, Strategic investors, Active investors, Delegated portfolio management, Limited partnerships

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Suggested Citation

Cumming, Douglas J. and Monteiro, Pedro, Sovereign Wealth Fund Investment in Venture Capital, Private Equity, and Real Asset Funds (October 24, 2022). Center for Financial Studies Working Paper No. 700, 2023, Available at SSRN: https://ssrn.com/abstract=4364353 or http://dx.doi.org/10.2139/ssrn.4364353

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/douglas-cumming

Pedro Monteiro

University of Scranton - Kania School of Management ( email )

320 Madison Avenue
Scranton, PA 18510
United States

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