Friday, March 24, 2017

9:00 a.m. to 4:00 p.m.

Wake Forest University School of Law, Room 3221

CLE Credits: 4.50 General Hours Approved

This event is free and open to the public.

Registration is now Closed.
Thank you to all who attended and/or participated.


A campus parking map can be found here. Reserved parking will be available for registered symposium attendees at the Winston-Salem First Church parking lot (Letter A on the map). A shuttle will run from that parking lot to the law school. Alternatively, it is only a 5-7 minute walk to the Worrell Professional Center.

Please direct any questions to Sarah Saint at [email protected].


Sovereign wealth funds (SWFs) have emerged over the last decade as an important new force in global finance.

As state-owned financial intermediaries, SWFs have both unique funding sources and investment goals.  Whether funded by oil revenues or excess export earnings, SWFs have tended to allocate their investment portfolios across assets classes, regions and industries in ways different from other financial intermediaries.  In short, SWFs represent a new and largely unregulated investor paradigm.

The symposium will explore the legal and financial future of SWFs — including for the states that fund them, the countries and companies in which they invest, and the (emerging) systems of hard and soft law that govern their activities.  


9:00 Dean’s Welcome
Dean Suzanne Reynolds Dean, Wake Forest University School of Law
9:10 Introductory Remarks
Alan Palmiter Howard L. Oleck Professor of Business Law, Wake Forest University School of Law
9:20 Panel
Moderator: Kish Parella, Associate Professor of Law, Washington and Lee University School of Law
Locknie Hsu Professor of Law, Singapore Management University The Role and Future of Sovereign Wealth Funds: A Trade and Investment Perspective
Edwin M. Truman Senior Fellow, Peterson Institute for International Economics Sovereign Wealth Fund Transparency and Accountability Explored
Enrico Ginevra Professor of Law, University of Bergamo The Problem of Sovereign Wealth Fund Transparency in European Union Financial Markets: The European Rules on Institutional Investors and the Italian Perspective
10:35 Morning Break
10:55 Panel
Moderator: Kish Parella, Associate Professor of Law, Washington and Lee University School of Law
David Freeman Partner, Arnold & Porter Kaye Scholer U.S. Financial Regulation of Sovereign Wealth Funds
William Megginson Professor and Price Chair in Finance, University of Oklahoma Michael F. Price College of Business International Relations and Sovereign Wealth Funds’ Political Value: Evidence from a Quasi-Natural Experiment
Patrick Schena Adjunct Assistant Professor of International Business Relations, Tufts University Fletcher School Sovereign Wealth Management 2.0: Financing Growth and National Competitiveness
12:10 Lunch
1:30 Panel
Moderator: Alan Palmiter, Howard L. Oleck Professor of Business Law, Wake Forest University School of Law
Beate Sjåfjell Faculty of Law, University of Oslo Investing in Sustainability or Feeding on Stranded Assets? The Norwegian Government Pension Fund Global
Marc-Philippe Weller Professor of Law, Heidelberg University Sovereign Wealth Funds Investing in Germany: Public Policy-Restrictions or Free Movement of Capital?
Paul Rose Frank E. and Virginia H. Bazler Designated Professor in Business Law, Ohio State University Moritz College of Law What Responsibilities Do Sovereign Funds Have to Other Investors?
2:45 Afternoon Break
3:05 Panel
Moderator: Alan Palmiter, Howard L. Oleck Professor of Business Law, Wake Forest University School of Law
Larry Catá Backer W. Richard and Mary Eshelman Faculty Scholar, Penn State Law Sovereign Wealth Funds, Capacity Building, Development, and Governance
Chris Thomale Professor of Law, University of Heidelberg Sovereign Wealth and Social Responsibility
3:55 Closing Remarks
4:00 Adjourn


Sovereign Wealth Funds, Capacity Building, Development, and Governance
Larry Catá Backer

Though operating in some form or another for over half a century, sovereign wealth funds (SWFs) did not become an object of general attention until the early part of the 21st century when a combination of the need of developed states for investment and the growing acceptability of state investment in private markets abroad made them both threatening and convenient.  Assured by the framework of the Santiago Principles most states now view SWFs as a useful multi-purpose sovereign investment vehicle.  Yet over the last decade or so, SWFs appear to have developed the potential to become an important instrument in good governance and development, especially for resource rich and capacity poor developing states.  Following the lead of Chile, and with the patronage of IFIs, these SWFs have begun to serve objectives as and with development banks both within and beyond their home state.  This paper considers the capacity of SWFs to serve ends beyond mere fund value maximization as envisioned in Santiago Principle 19. It explores the value of SWFs as a means of enhancing governance capacity in weaker states, its utility in enhancing development objectives, the emerging landscape of joint ventures among SWFs for development and their intersections with emerging infrastructure and development banks, and their importance in enhancing the operationalization of emerging international business and human rights standards not only within their own organizations but through their investment activities.  A brief assessment of these trends ends the paper.

U.S. Financial Regulation of Sovereign Wealth Funds
Dave Freeman

An overview of direct and indirect U.S. financial regulation (SEC, CFTC, Federal Reserve) of domestic and foreign sovereign wealth funds, proposed changes, and the difficulties and anomalous effects posed by these regulations.

The Problem of SWF transparency in EU Financial Markets: The European Rules on Institutional Investors and the Italian Perspective
Enrico Ginevra

In this paper, I plan to afford the theme of individuation and selection of the transparency duties of SWF in Europe and in Italy, taking into account the general EU and Italian provisions about information duties in the Financial Markets of Institutional Investors. I will argue about possible terms of application of these provisions (or similar principles) to SWFs, in the light of their specific patterns.

International Relations and Sovereign Wealth Funds’ Political Value: Evidence from a Quasi-Natural Experiment
William L. Megginson & Gabriele Lattanzio

Almost 10 years ago, Lawrence Summers expressed his concerns about the possibility of foreign governments directly influencing the U.S. economic and political systems through direct investements realized through their Sovereign Wealth Funds (SWFs), a new form of government-owned investment vehicle used to invest internationally in stocks, bonds, and real estate in search of a higher financial return than that offered by investing solely in sovereign bonds. In a famous article published by the Financial Times, Summers stated that “[there] are particular risks associated with ownership by government-controlled entities, particularly where the ownership stake is taken through direct investments. The logic of the capitalist system depends on shareholders causing companies to act so as to maximize the value of their shares. It is far from obvious that this will over time be the only motivation of governments as shareholders. They may want to see their national companies compete effectively, or to extract technology or to achieve influence”.[1] These concerns have been followed by a careful investigation of the extent to which SWFs pursue non-financial objectives, originating an extensive legal (Avendaño and Santiso, 2009, Epstein and Rose, 2009, Gutin, 2010, among others) and financial (Fotak and Megginson, 2015, and Fotak, Gao, and Megginson, 2016) literature dibating whether or not an ad hoc regulation for these funds should be structured and enforced. This extensive analysis has resulted in the identification of no evidence of political interference by SWFs in the behavior of their foreign targets. Notwithstanding the absence of empirical evidences, it would be naïve to assume that SWFs never make politicized capital allocations. In this sense, the identification of a SWF discount (Bortolotti et al., 2014) might provide some support for the political nature of these funds. In fact, the existence of this discount might be at least partially explained as a rational market reaction to the expectation of the occurrence of some forms of political interference by SWFs on their foreign targets.

In this paper, we investigate if this is indeed the case. That is, we study if the SWF discount can be (at least partially) explained by governments using these funds as vehicles to exercise political pressures on a foreign country. In particular, we will focus on whether or not this phenomenon is relevant for the American political system by exploiting Donald Trump’s election as President-Elect as an exogenous shock to international relations between the United States of America and other foreign countries. After dealing with the endogeneity of SWFs ownership (Megginson, You, Han, 2013), we will test the hypothesis that firms partially owned by SWFs from countries that were directly and repeatedly attacked by Trump during his political campaign reacted differently (and, in particular, more negatively) to his unexpected victory than other carefully selected suitable counterfactuals. In particular, if firms reacted heterogeneously to the election’s result conditional on their SWFs’ ownership status, all else equal, then these results would suggest that the market is pricing foreign governments’ political interferences through their SWFs, and, consequently, it would provide strong support for that (1) political factors are likely to explain a significant portion of the SWF discount, and (2) that the U.S. political system is not completely immune to interferences from foreign governments occurring through their SWFs’ investments.[2] Conversely, if SWFs’ ownership has no explanatory power with respect to the cross-sectional heterogeneity in firms’ reaction to Trump’s election, this would provide support for the hypothesis that these funds have been successfully isolated from their governments, and that the market perceives them as “normal”, private, institutional investors.

In conclusion, this study contributes to the discussion about whether or not an ad hoc regulation for SWFs should be structured and enforced by studying if the market perceived their investments as fully exogenous to international relations. Furthermore, this paper provides evidence concerning whether or not SWFs’ international political conncetions are priced in the market, verifying if they can actually explain at least a portion of the SWF discount identified in Bortolotti et al. (2014).

What Responsibilities Do Sovereign Funds Have to Other Investors?
Paul Rose

Iman Anabtawi and Lynn Stout have argued that certain investors should owe a fiduciary duty to the corporation (and to other investors).  My piece makes a more modest claim—not a call for fiduciary duties for sovereign funds (which would be difficult, if not impossible, to enforce), but a call for a sovereign investors to recognize the special responsibilities they have to other investors.  Although they should not receive any more regulatory scrutiny than other investors, assuming they are acting appropriately, their market power and connection to the larger government (even if they enjoy—as they should—a large amount of autonomy) call for a sense of responsibility that sovereign funds should embrace.

Sovereign Wealth Management 2.0: Financing Growth and National Competitiveness
Patrick Schena

The earliest of SWFs were structured to either buffer commodity or fiscal flows or to save windfalls from resource of export revenues.  These are both important macro-economic functions.  More recently – certainly increasingly in the wake of lower oil – governments have turned to fund structures as vehicles to accumulate, catalyze, and allocate capital to promote long-term structural objectives.  This essay will focus on:

  • A survey and definitions of alternative sovereign fund structures
  • Drivers of the evolution and acceleration of sovereign development and strategic investment funds
  • Alignment of fund design and governance with purpose and mandate
  • Selected case examples
  • Toward a best practice framework

Investing in Sustainability or Feeding on Stranded Assets?
The Norwegian Government Pension Fund Global
Beate Sjåfjell, Heidi Nilsen, & Benjamin J. Richardson

We know that access to finance is crucial if we are to achieve the fundamental transition necessary to meet the grand challenge of our time: securing a safe and just operating within the planetary boundaries. This paper undertakes a case study of the world’s largest Sovereign Wealth Fund (SWF), the Norwegian Government Pension Global. In the era of global market capitalism and deregulation, SWFs offer one of the few public economic institutions capable of injecting ecological and social values into global markets. The Norwegian Fund is well-known for its ethical profile. This includes exclusion of companies based on products (tobacco, certain weapons, and most recently also coal), and observation and potential exclusion based on conduct (including severe violations of human rights, severe environmental damage, gross corruption and other particularly severe violations of fundamental ethical norms), as well as the Fund’s public statements when withdrawing from companies based on conduct in the cases when its attempts at influencing the companies have failed.

The paper discusses the Fund’s mandate and whether the general management of the fund reflects the financial risk evaluation that is meant to be an integrated element in a long term, sustainability-oriented perspective. Further, the paper analyses the Fund’s engagement with and potential withdrawal from companies, querying whether the informational basis for the Fund’s decisions is relevant, reliable and verifiable. The paper draws on and develops further insights from a multijurisdictional comparative analysis of corporate law and accounting law, in this case study in the interface of legal and economic scholarship.

The issues analysed include whether the Fund in practice is more reactive rather than proactive, responding to public opinion and media controversy when considering divestment, rather than undertaking due diligence beforehand and continuously monitoring its investments. The controversial North Dakota pipeline will be discussed as a case point.  

Through this analysis of the Fund’s governance, the paper explores the broader enquiry of whether institutional design can assure investments that contribute to sustainability, often referred to as Socially Responsible Investment (SR), or whether the power of global markets, capitalism and other drivers of the Anthropocene are too strong for any institutional design to overcome.

Sovereign Wealth and Social Responsibility
Chris Thomale

I will analyze the interrelations between the public/private divide implicit in sovereign wealth funds and its relationship with the applicable standards of “corporate” social responsibility (i.e. Ruggie).

Sovereign Wealth Fund Transparency and Accountability Explored
Edwin M. Truman

The first section introduces the sovereign wealth fund (SWF) scoreboard and presents the results for the most recent (2015) and three previous (2007, 2009, and 2012) scoreboards. The scoreboards cover 33 elements. The second section explores the relationship between those elements and categories of elements as indicators of transparency and accountability in governments. The third section seeks to explain the most recent scoreboard results in terms of other conditioning factors. The results of the scoreboard are highly correlated with other indicators of transparency. A different question is how to explain differences between the scores of funds in different countries. Culture and political organization are important, but here I differentiate between three influences: external pressure coming from the countries where the funds invest, internal pressure associated with domestic politics, and peer pressure associated with the performance of other funds. The hypothesis is that each influence is important, but I provide evidence on the relative weight of different influences. The final section uses similar indicators to explain the substantial progress in transparency and accountability of some funds and not others based on the results of the four scoreboards.