What Asset-Liability Management Strategy For Sovereign Wealth Funds?

This publication presents the industry reactions to an EDHEC-Risk Institute study entitled “Asset-Liability Management Decisions for Sovereign Wealth Funds”. That study put forward a model to optimise the investment and risk management practices of sovereign wealth funds, which can be regarded as the extension to sovereign wealth funds of the liability-driven investing paradigm recently developed in the pension fund industry. The model suggested that the investment strategy of a sovereign wealth fund should involve a state-dependent allocation to three main building blocks: a performance-seeking portfolio, an endowment-hedging portfolio, and a liability-hedging portfolio. The objective of the current publication is to compare these research conclusions with current perceptions by sovereign investment professionals.