Strategic Asset Allocation for Sovereign Wealth Funds

This event has now finished.
  • Date and time: Thursday 12 May 2022, 2pm to 3pm
  • Location: Online only
  • Audience: Open to All
  • Booking:

Event details

This seminar is hosted by Kostas.

We propose a normative strategic asset allocation model for long horizon sovereign wealth funds (SWFs). SWFs optimally choose asset allocation to smooth background shocks from persistent commodity prices and business cycles subject to a sustainable spending constraint. SWFs should have lower stock market exposure as they mature, and should use the SWF to smooth business cycle shocks, rather than commodity price shocks, in well-diversified economies.

The government’s taxation capacity, or consumption commitments, substantially affect asset allocation, and low real interest rates generate a 'reaching for yield' portfolio behaviour. Higher expected growth without a sustainability constraint generates a smaller SWF.

About the speaker

Alex Michaelides (Imperial)