Fit for Purpose? Sovereign Wealth Funds Performance and Behaviour

The literature on Sovereign Wealth Funds (SWFs) tends to evaluate the structure of SWFs at inception, the governance of the Fund and then use performance metrics. What is less studied is the extent to which the SWF meets the standard of “fit for purpose”. This term could refer to many things. In the context of this paper it addresses the extent to which the SWF at inception is designed to prevent conflicts between goals. This paper reviews the recent literature and develops a dashboard of measures focused on the short-term, medium-term, and long-term goals. In particular, the paper focuses on how the behaviour and performance of SWFs have changed as markets experienced significant changes in interest rates (both down and up) and inflation. The overall conclusions suggest that while adaptation will be essential as the economic environment changes over time, and it is possible that some SWFs will not meet a strict interpretation of “fit for purpose”.