12:15 - 13:30
Room: InnovationsLab, 305
Date: February 20, 2013 - 12:15 - 13:30
Building: Frankel Leo ut 30-34
Room: InnovationsLab, 305
Event type: Seminar
Event audience: CEU Community Only
Despite their new found popularity, sovereign wealth funds date back as many as fifty years. Originally intended to counteract the boom and bust cycles of oil and commodity dependent economies, stabilization funds grew out of countries attempts to establish rainy day funds which could tide them over when prices fell and promote economic development. Here I provide a brief history of sovereign wealth funds, their evolution from small rainy day funds to major international investors, their increased sophistication, and the spread to an increasing number of countries. I then turn to examine the impact of a non-commodity fund on a countries finances. Financial data reported by Singapore and Temasek Holdings reveal problematic characteristics.
First, Temasek reports an average annual return of 17% for 35 years despite Singaporean stock returns averaging less than 8% during this same time period. Given the range of stock market returns and its portfolio companies’ returns, it is highly improbably that Temasek has earned the returns claimed in its annual reports.
Second, Singapore has become one of the most indebted countries in the world despite supposedly running large and sustained government surpluses. Given publicly available economic data on Singaporean finances, there is a minimum of $350 billion SGD or $275 billion USD unaccounted for from historical surpluses and financing operations.
Third, given these results I find that for every $1 SGD in public borrowing, Singapore has received only 25 cents of publicly held Singaporean assets. Either financial returns have been drastically overstated or there are large unreported Singaporean controlled holdings.
Christopher Balding is an Associate Professor of International Business at the Peking University HSBC School of Business in Shenzen, China. He holds a BA in International Affairs and an MA in International Economics from the George Washington University and a PhD in Political Economics from the University of California, Irvine. His research focus studies a variety of real world problems of emerging market economies in an academically creative way and uses rigorous methods at the intersection of finance, economics and political science. He has published a book, "Sovereign Wealth Funds: The New Intersection of Money and Politics", published by Oxford University Press, and a number of articles in respected international journals, such as the Review of International Economics, The Journal of International Trade and Economic Development, and the Journal of Emerging Market Finance. His working paper, "A Portfolio Analysis of Sovereign Wealth Funds", is examining whether their investment patterns showed signs of politicization. This has gone on to become one of the most downloaded and cited papers on sovereign wealth funds with coverage in the Wall Street Journal and Financial Times.