Case | HBS Case Collection | May 2008 (Revised July 2009)

Sovereign Wealth Funds: For Profits or Politics?

by Laura Alfaro and Renee Kim

Abstract

On March 21, 2008, the U.S. government secured an agreement from two leading sovereign wealth funds (SWFs) to adopt a new set of investment principles to govern the Funds' activities. SWFs, broadly defined as an investment fund owned by a national or a government, were gaining prominence across the globe, especially with their recent investments in troubled U.S. financial firms that had suffered significant losses from the subprime mortgage crisis. Yet SWFs were viewed with suspicions amid concerns that they could have potential political interests behind their investments. Many SWFs also lacked disclosure or transparency regarding their activities or investment goals. Countries such as the United States felt that some kind of international regulation had to be imposed, but would it be possible?

Keywords: Foreign Direct Investment; Investment Funds; Sovereign Finance; Corporate Disclosure; Governing Rules, Regulations, and Reforms; International Relations; State Ownership; United States;

Citation:

Alfaro, Laura, and Renee Kim. "Sovereign Wealth Funds: For Profits or Politics?" Harvard Business School Case 708-053, May 2008. (Revised July 2009.)