Sovereign Wealth Funds

Project outline


In this project, we analyse how policy makers in Europe and the US react to foreign investments by Sovereign Wealth Funds that are often based in the Middle East and Asia. 


Thatcher, M. and Vlandas, T. (2021) “Foreign States in Domestic Markets: Sovereign Wealth Funds and the West” Oxford University Press.

Political economy debates have focused on the internationalisation of private capital, but foreign states increasingly enter domestic markets as financial investors. How do policy makers in recipient countries react? Do they treat purchases as a threat and impose restrictions or see them as beneficial and welcome them? What are the wider implications for debates about state capacities to govern domestic economies in the face of internationalisation of financial markets? In response, Foreign States in Domestic Markets have developed the concept of 'internationalised statism', where governments welcome the use of foreign state investments to govern their domestic economies. These foreign state investments are applied to the most prominent overseas state investors, Sovereign Wealth Funds (SWFs). Many SWFs are from Asia and the Middle East and their number and size have greatly expanded, reaching $9 trillion by 2020. This book examines policies towards non-Western SWFs buying company shares in four countries: the US, UK, France, and Germany. Although the US has imposed significant legal restrictions, the others have pursued internationalised statism in ways that are surprising given both popular and political economy classifications. This book argues that the policy patterns found are related to domestic politics, notably the preferences and capacities of the political executive and legislature, rather than solely economic needs or national security risks. The phenomenon of internationalised statism underlines that overseas state investment provides policy makers in recipient states with new allies and resources. The study of SWFs shows that internationalisation and liberalisation of financial markets offer national policy makers opportunities to govern their domestic economies.

Thatcher, M. and Vlandas, T. (2016) “Overseas state outsiders as new sources of patient capital: government policies to welcome Sovereign Wealth Fund investment in France and Germany” Socio-Economic Review [PDF]

Strong debates in the varieties of capitalism literature as to whether financial liberalization and internationalization undermine ‘insider’ corporate governance systems based onpatientcapitalincoordinatedandstate-ledmarketeconomieshavefocusedon‘impatient’ overseas private capital. However, cross-border state investment has also grown. Weexaminegovernmentpoliciestowardsaprominenttypeofstateinvestment—equity purchases by sovereign wealth funds (SWFs). We argue that policymakers in ‘insider’ corporate governance systems can see such investment as an attractive international source of patient capital to offset declines in traditional sources of patient capital. We compare Germany and France and show that policymakers actively welcome SWF investment. Policy is driven by coalitions of ‘insiders’ of the managements of large industrial firms and governments who seek passive patient capital and beneficial relationships with overseas investors. Thus, financial liberalization and internationalization canallownewsourcesofpatientcapitalthroughoverseasstateinvestors.