Research Handbook on Sovereign Wealth Funds and International Investment Law
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Research Handbook on Sovereign Wealth Funds and International Investment Law

Edited by Fabio Bassan

Research on the role of sovereign investments in a time of crisis is still unsatisfactory. This Research Handbook illustrates the state of the art of the legal investigation on sovereign investments, filling necessary gaps in previous research. Current focus is based on investment flows and trends, grounded in economic scenarios and objectives. Conversely, investigations from a legal standpoint are still few, namely disregarding the host states’ concerns about sovereign investments goals and tools. Hence, most of the many relevant drivers that affect current sovereign investments, be they FDI or portfolio investments, remain unexplained. This book investigates the juridical foundation of sovereign investments and extends our frontier of understanding.
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Chapter 13: SWFs and development

Michele Vellano and Annamaria Viterbo


The purpose of the chapter is to assess whether and to what extent SWFs can be considered tools of development. In literature the presumption often stands that the establishment of a sovereign fund by an emerging or developing economy helps wealth diversification for the benefit of future generations. Clearly, SWFs are set up to contribute to a country’s own macroeconomic growth by stabilizing prices and revenue and by cushioning the impact of economic turbulence. However, SWFs can promote development not only in the country setting up the fund, but also in the countries where the investments will be made. In this sense, SWFs can be treated as development funds. Starting from this assumption, the chapter analyses what set of factors and rules related to the functioning of SWFs would better achieve the objective of promoting development. In particular, for an SWF to be an effective instrument for the development of the home country, attention should be paid to: the SWF’s institutional independence from the government; the scope of its mandate; and the rules on portfolio allocation. Similarly, the rules on portfolio allocation and the adoption of ethical guidelines are determining factors for an SWF to be considered a development tool also for host countries. The chapter concludes by considering the relationship between SWFs and the World Bank or regional development banks.

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