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Sovereign Investor Models: Institutions and Policies for Managing Sovereign Wealth

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Sovereign investor models: Institutions and policies for managing sovereign wealth Khalid A. Alsweilem Angela Cummine Malan Rietveld Katherine Tweedie Sovereign investor models: Institutions and policies for managing sovereign wealth Khalid A. Alsweilem The Belfer Center for Science and International Affairs Harvard Kennedy School Angela Cummine British Academy Post-doctoral Fellow University of Oxford Malan Rietveld Investec Investment Institute & The Center for International Development Harvard Kennedy School Katherine Tweedie Investec Investment Institute A joint report by The Center for International Development Harvard Kennedy School The Belfer Center for Science and International Affairs Harvard Kennedy School Sovereign investor models Background and acknowledgements Background This research features the insights of experts from a number of the world’s leading universities, former policymakers, and investment professionals. The report is the result of collaboration between two centers at Harvard Kennedy School: the Belfer Center for Science and International Affairs and the Center for International Development (CID). Dr. Khalid Alsweilem, the former Chief Counselor and Director General of Investment at the Saudi Arabian Monetary Agency (SAMA), joined the Belfer Center as a Fellow in 2013 to conduct research on sovereign wealth funds, with a particular focus on the management of Saudi Arabia’s reserves and their links to the real economy. He is one of the longest serving and most successful sovereign investment practitioners, having held senior investment positions at SAMA for over two decades. Malan Rietveld and Angela Cummine are sovereign wealth fund experts and have conducted doctoral research on the topic at Columbia University and the University of Oxford, respectively. Katherine Tweedie has led the Investec Investment Institute’s collaboration with CID, supporting Professor Ricardo Hausmann and his team’s groundbreaking research on the role of productive knowledge as a primary driver of economic growth. The complimentary interests and expertise of this group has resulted in a broad-based approach to the study of sovereign wealth funds. In order to understand and analyze the policies and institutional arrangements of leading sovereign wealth funds, we have used official documents, economic theory, and statistical analysis, as well as interviews with leading sovereign wealth fund policymakers, advisors, and scholars. This report, together with the accompanying profiles of leading sovereign wealth funds and our quantitative model, offers a comprehensive overview of the management of sovereign wealth, and lays the foundation for deeper analysis of context-specific policies and institutional arrangements on a country- by-country basis. Acknowledgements Since 2013, the Investec Investment Institute has provided financial support to CID as a Founding Member of the Atlas of Economic Complexity. The experience and expertise of CID scholars, notably Professor Hausmann and Eduardo Lora, on the management of resource revenues and sovereign wealth funds has been highly influential in the development of this report. The Investment Institute is the strategic insights platform of Investec Asset Management, a global asset manager whose clients include pension funds, sovereign wealth funds and other institutional investors from around the world. Copyright © Copyright 2015 President and Fellows of Harvard College The authors of this report invite use of this information for educational purposes, requiring only that the reproduced material clearly cite the full source: Alsweilem, Khalid A.; Cummine, Angela; Rietveld, Malan; Tweedie, Katherine. “A comparative study of Sovereign investor models: Institutions and policies for managing sovereign wealth” Discussion Paper, Belfer Center for Science and International Affairs and Center for International Development, Harvard Kennedy School, April 2015. Statements and views in this discussion paper are solely those of the authors and do not imply endorsement by Harvard University, the Harvard Kennedy School, the Belfer Center for Science and International Affairs, or the Center for International Development. Sovereign investor models Sovereign investor models 1 Author biographies Khalid A. Alsweilem Angela Cummine Former Director of Investments, British Academy Post-doctoral Saudi Arabia Monetary Agency Fellow, University of Oxford Fellow, Belfer Center, Harvard Kennedy School Dr. Khalid A. Alsweilem is the former Chief Counselor and Dr. Cummine is a British Academy Postdoctoral Fellow at Head of Investment at the Saudi Arabian Monetary Agency the University of Oxford where she completed a doctorate (SAMA). He joined SAMA in 1991 after completing a two- on Sovereign Wealth Funds (SWFs), identifying principles year post doctoral fellowship at Harvard University’s for their proper management, investment and distribution. Department of Economics, focusing on the application of Her post-doctoral research focuses on the governance of portfolio theory to government finance in Saudi Arabia, and democratic rights to state-owned financial entities. uncertainty in export earnings, and producer-consumer She served as a consultant to the Investec Investment cooperation in the global oil market. Dr. Alsweilem served as Institute in 2014. SAMA’s Head of Investment Management (Chief Investment Prior to this, she worked at the Official Monetary and Officer) and from 2002, Director General of the Department Financial Institutions Forum (OMFIF), as co-editor of the in addition to his role as the CIO. He was also responsible Global Public Investor 2014, a new worldwide publication for the implementation of SAMA’s monetary policy on public sector asset management at official institutions. operations to ensure banking sector system liquidity and the During her doctoral studies, she worked as a consultant to strength and stability of the Saudi local currency. the inaugural Chairman of the Australian Future Fund and Dr. Alsweilem is currently a non-resident Fellow at the Belfer the International Forum of Sovereign Wealth Funds (IFSWF) Center for Science and International Affairs at the Harvard on the fair treatment of SWFs, the OECD (Paris office) on Kennedy School where his research focuses the design and international investment issues and Institutional Investor’s governance of sovereign wealth funds, with a particular Sovereign Wealth Centre as an SWF analyst. She focus on Saudi Arabia’s reserve funds and their linkages to commenced her career in the Australian Department of the the real economy. Dr. Alsweilem holds a BS in Industrial Prime Minister and Cabinet as a policy advisor to the Prime Engineering from the University of Arizona, an MA in Minister’s office. Economics from Boston University, and a PhD in Economics Angela holds a PhD and Masters (with Distinction) in from the University of Colorado, Boulder. Political Theory from the University of Oxford where she was a Rhodes Scholar and Jenkins Memorial Scholar. She holds a 1st Class Honours BA LLB from the University of Sydney and is an admitted lawyer in the Supreme Court of NSW (2007). 2 Sovereign investor models Malan Rietveld Katherine Tweedie Director, Investment Institute, Investec Executive Director, Investment Asset Management Institute, Investec Asset Management Fellow, The Center for International Development, Harvard Kennedy School Malan Rietveld is the Director of the Investment Institute. His Katherine Tweedie is the Executive Director of the focus is on policies towards investment around the extractive Investment Institute where she plays a central role in industries, including resource-related infrastructure, foreign managing the thought leadership and strategic engagement direct investment and the management of resource revenues. of Investec Asset Management. The primary purpose of the Previously, he worked in the Emerging Market Debt team at Investment Institute is to develop in-depth research and Investec Asset Management and was involved in the firm’s thought leadership that supports the firm's investment advisory work with central banks and sovereign wealth funds. teams and the asset allocation decisions of its clients which Prior to that he worked at Central Banking Publications and include central banks, foundations, sovereign wealth funds the Official Monetary and Financial Institutions Forum in and pension funds from around the world. She has London. He is the editor of three books on sovereign wealth extensive prior experience in investment banking and private funds: Sovereign Wealth Management (with Jennifer equity and was formerly Head of Africa for the World Johnson-Calari), New Perspectives on Sovereign Asset Economic Forum, where she was responsible for key Management and Sovereign Risk Management. relationships and strategic initiatives with government and business leaders at Davos and the World Economic Forum Malan holds an M.Sc in Economics from the University of on Africa. She commenced her career in mergers and Leuven and an M.Sc in Economic History from the London acquisitions at a Canadian investment bank and School of Economics. He is currently completing his PhD in subsequently joined a pan-African private equity firm based Economics from the University of Stellenbosch on the topic of in Johannesburg. sovereign wealth funds. Katherine holds a Masters in Public Administration from the Malan is a Fellow at the Center for International Development Harvard Kennedy School of Government where she was at Harvard Kennedy
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