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Authors:

• William MEGGINSON
  University of Oklahoma

• William F. Miracky
  Senior Partner, Monitor Group

• Bernardo Bortolotti
  Università do Torino

• Veljko Fotak
  University of Oklahoma

We examine the investment patterns and performance of 32 sovereign wealth funds between January 1986 and September 2008. Most of the 1,216 SWF investments we document occur after June 2005 and most equity investments are privately-negotiated stock purchases in underperforming firms. SWFs have lost over $66 billion on their listed stock investments alone through March 2009. Announcements of SWF listed stock purchases yield significantly positive abnormal returns averaging 0.9%, but two-year abnormal returns average -15.49%, suggesting SWFs do not create value through monitoring but instead exacerbate agency problems between managers and shareholders. Cross-sectional regressions and robustness tests support this conclusion.