Are Government Owned Investment Funds Created Equal? Evidence from Sovereign Wealth Fund Real Estate Acquisitions


Sovereign Wealth Funds (SWFs) are an institutional investor class about which relatively little is known. Even though they have trillions of dollars in assets under management, their (typically) highly secretive nature renders them difficult to analyze in an academic context. We utilize transactional data from the Sovereign Wealth Fund Institute to provide the first academic analysis of SWF real estate investment activity of which we are aware. To better understand this growing investor class, we compare SWFs with their most closely related institutional group, public pension funds (PPFs). While both SWFs and PPFs are state owned investment funds, we find SWFs have lower Stone and Truman (2016) best practice scores (based on fund structure, governance, transparency and accountability, and behavior.) Further, while both SWFs and PPFs show increasing levels of cross-border real estate investment, SWFs are significantly more likely than PPFs to invest across international borders. We find the percentage of SWF cross-border real estate investment to be substantially higher than the percentage of SWF cross-border investment in public and private equity documented in other studies. Moreover, in a subsample of acquisitions in the U.S., cross-border real estate investments are in locations with lower capitalization rates than domestic acquisitions for both SWFs and PPFs, and there is no discernable difference in rates across the two fund types, on average.

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  1. 1. (Accessed 10/12/2017).

  2. 2.

    By comparison, the total assets under management for all hedge funds and private equity funds during the same time are estimated to be $3 trillion and $2.5 trillion, respectively.

  3. 3. (Accessed 10/13/2017).

  4. 4. (Accessed 10/13/2017).

  5. 5. (Accessed 9/25/2014).

  6. 6. (Accessed 10/13/2017).

  7. 7. (Accessed 7/12/2017).

  8. 8.

    The use of Stone and Truman (2016) scores, and an earlier version by Truman (2008), is well established in the SWF literature. For example, Dewenter et al. (2010) and Kotter and Lel (2011) incorporate the scores to capture the cross section of best practices by sovereign wealth funds. As Stone and Truman (2016) show, fund scores can be loosely interpreted as a type of fund governance quality ranking and have improved over time as funds have voluntarily chosen to more closely follow the generally accepted principles and practices laid out by an international working group of SWFs over the course of three meetings held in Washington, D.C., Singapore, and Santiago, Chile. See IWG (2008) for the original “Santiago Principles.”

  9. 9.

    See Alhashel (2015) for a review of the literature that supports the idea that SWFs are economic agents that act in a similar manner to other institutional investors.

  10. 10.

    CoStar and Real Capital Analytics have some transactional information on U.S. properties with foreign wealth fund investment. However, we find the SWFI database to be the best in terms of coverage for the present study. Moreover, this exercise is limited to transactional data as portfolio holdings data are not currently available.

  11. 11.

    Honk Kong is considered separate from China for purposes of this study.

  12. 12.

    The calculation of the coverage of the sample is limited by the fact that we do not account for price changes of assets held nor do we adjust for asset sales and instead simply report the value of transactions observed.

  13. 13.

    Some SWFs are restricted from investing domestically. However, in unreported results we find our inferences remain unchanged when they are excluded.

  14. 14.

    While this specification can be interpreted as the likelihood of being a SWF, we find it to be a useful means of establishing whether there are observed differences between SWFs and PPFs.


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This paper has benefited from the helpful comments and suggestions of two anonymous reviewers, Maarten van der Spek (Abu Dhabi Investment Authority) and seminar participants at University College London, San Diego State University, the 2018 ARES Conference, and the 2018 AREUEA National Conference. We also thank Xin Fang for research assistance. A portion of this study was completed while McKay Price was a visiting scholar at the University of Cambridge. All remaining errors are our own.

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Correspondence to S. McKay Price.

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Appendix 1

Table 12 Variable descriptions

Appendix 2 SWF/PPF Classification

The acquirer in every transaction was reviewed and the classification by SWFI was double-checked in all cases. Some PPFs are, in essence, wholly owned government subsidiaries. These are considered to be government owned as they are still subject to the same pressures and influences. We follow the literature (Miracky and Bortolotti 2009; Bortolotti et al. 2015) and rely on the Sovereign Investment Lab (SIL) definitions, in all cases, in classifying buyers as either SWFs or PPFs. Collectively, we altered SWFI classifications for 12 funds consisting of 115 observations. In particular, we made the following changes to SWFI classifications:

  • Queensland Investment Corporation was changed from Superannuation to PPF (4 observations).

  • Korea Post was changed from Public Fund to PPF (9 observations).

  • UniSuper was change from Superannuation to PPF (1 observation).

  • Permanent Wyoming Mineral Trust Fund was changed from SWF to PPF (1 observation).

  • Texas Permanent School Fund was changed from SWF to PPF (7 observations).

  • New Mexico State Investment Council was changed from SWF to PPF (5 observations).

  • Hong Kong Monetary Authority was changed from SWF to PPF (5 observations).

  • Canada Plan Investment Board was changed from SWF to PPF (1 observation).

  • CalPERS was changed from SWF to PPF (1 observation).

  • AustralianSuper was changed from Superannuation to PPF (6 observations).

  • Alaska Permanent Fund was changed from SWF to PPF (73 observations).

  • Alberta Investment Management Corporation was changed from SWF to PPF (2 observations).

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Liu, P., Mauck, N. & Price, S.M. Are Government Owned Investment Funds Created Equal? Evidence from Sovereign Wealth Fund Real Estate Acquisitions. J Real Estate Finan Econ 61, 698–729 (2020).

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  • Sovereign wealth funds
  • Real estate investment
  • International real estate
  • Foreign investment
  • Cross-border investment
  • Public pension funds

JEL Classification

  • F21
  • G11
  • G23
  • O16
  • O18
  • P52