While SWF investment objectives to some extent reflect inherent characteristics, notable differences in strategic asset allocation (SAA) exist even amongst SWFs of similar types. Even so, this paper shows that the global crisis may have changed SWF’s asset allocations in ways that may not be ideal or justified in all cases and that a review of investment objectives may be warranted. It also argues for regular macro-risk assessments for the sovereign, the continued importance of SWFs as a stabilizer in international capital markets, as well as the active role they could play in international regulatory reform.
A decade-long diversification of official reserves into riskier investments came to an abrupt end at the beginning of the global financial crisis, when many central bank reserve managers started to withdraw their deposits from the banking sector in an apparent flight to quality and safety. We estimate that reserve managers pulled around US$500 billion of deposits and other investments from the banking sector. Although clearly not the main cause, this procyclical investment behavior is likely to have contributed to the funding problems of the banking sector, which required offsetting measures by other central banks such as the Federal Reserve and Eurosystem central banks. The behavior highlights a potential conflict between the reserve management and financial stability mandates of central banks. This paper analyzes reserve managers’ actions during the crisis and draws some lessons for strategic asset allocation of reserves going forward.
This paper (i) provides evidence on the procyclical investment behavior of major institutional investors during the global financial crisis; (ii) identifies the main factors that could account for such behavior; (iii) discusses the implications of procyclical behavior; and (iv) proposes a framework for sound investment practices for long-term investors. Such procyclical investment behavior is understandable and may be considered rational from an individual institution’s perspective. However, our main conclusion is that behaving in a manner consistent with longterm investing would lead to better long-term, risk-adjusted returns and, importantly, could lessen the potential adverse effects of the procyclical investment behavior of institutional investors on global financial stability.
This paper (i) provides evidence on the procyclical investment behavior of major institutional investors during the global financial crisis; (ii) identifies the main factors that could account for such behavior; (iii) discusses the implications of procyclical behavior; and (iv) proposes a framework for sound investment practices for long-term investors. Such procyclical investment behavior is understandable and may be considered rational from an individual institution’s perspective. However, our main conclusion is that behaving in a manner consistent with longterm investing would lead to better long-term, risk-adjusted returns and, importantly, could lessen the potential adverse effects of the procyclical investment behavior of institutional investors on global financial stability.
While SWF investment objectives to some extent reflect inherent characteristics, notable differences in strategic asset allocation (SAA) exist even amongst SWFs of similar types. Even so, this paper shows that the global crisis may have changed SWF’s asset allocations in ways that may not be ideal or justified in all cases and that a review of investment objectives may be warranted. It also argues for regular macro-risk assessments for the sovereign, the continued importance of SWFs as a stabilizer in international capital markets, as well as the active role they could play in international regulatory reform.
A decade-long diversification of official reserves into riskier investments came to an abrupt end at the beginning of the global financial crisis, when many central bank reserve managers started to withdraw their deposits from the banking sector in an apparent flight to quality and safety. We estimate that reserve managers pulled around US$500 billion of deposits and other investments from the banking sector. Although clearly not the main cause, this procyclical investment behavior is likely to have contributed to the funding problems of the banking sector, which required offsetting measures by other central banks such as the Federal Reserve and Eurosystem central banks. The behavior highlights a potential conflict between the reserve management and financial stability mandates of central banks. This paper analyzes reserve managers’ actions during the crisis and draws some lessons for strategic asset allocation of reserves going forward.
This book is one of the first to focus on Medieval and Early Modern state formation on the north-eastern periphery of Europe. Researchers have traditionally perceived an East-West conflict between Sweden and Novgorod concerning the late medieval colonization of the northern forest areas, but it seems that the East Fennoscandian boreal forest zone was not an unpopulated area at that time, but was a landscape inhabited by heterogeneous hunting and fishing populations and possessing another kind of culture. The ways of life of these populations can be observed by coordinating various bodies of palaeoecological, palaeobotanic, genetic, meteorological, folkloristic, philological and archaeological material. The traditional written sources did not extend to this area, and its nature is only reflected in the expansion and organization of the European Christian culture and power, both Russian and Swedish. Also, the increasing number of source documents, the growing population as reflected in those written documents and the expansion of arable cultivation do not indicate any real colonization but simply a change of the existing economic system from a semi-nomadic hunting and fishing economy to a field-based agriculture in response to the expansion of regular taxation and state control. Seen from this perspective, the people who earlier were invisible gradually become visible in the sources. The East Fennoscandian boreal forest zone was a European periphery during the Viking Age, but was connected to the European exchange of goods through the same waterways that also brought the first Christian cultural impact. The European economic crisis of the 14th Century nevertheless excluded the area from the late medieval process of state formation, and it became an object of both Muscovite and Swedish interests only after the end of the 15th Century. This meant the formation of parishes, the organization of an early local administration with regular taxation, the permanent stationing of military forces, the establishment of a physical border, and the assimilation of the local people into European culture, accompanied by marginalization of the traditional forms of life.
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