Sovereign Investors: Between global financial ...

Sovereign Investors: Between global financial capitalism and state capitalism Caroline E. Nowacki, Stanford University, [email protected] Ashby Monk, Stanford University, [email protected]

ABSTRACT Sovereign investors are an emerging community of investment organizations, subject to the conflicting demands of international and domestic institutions. Existing research interprets them either as mirroring global financialization or preserving national interests. Both top-down global influences and bottom-up local pressures seem to co-exist, but it is unclear how these organizations manage the conflicts engendered. A path generation perspective applied to the whole community of sovereign investors allows us to capture this nuance. The availability of annual reports and websites published by sovereign investors represent a unique opportunity to analyze how this group responds to these multilevel pressures. Using machine learning to analyze the communication of 57 sovereign investors globally, we propose a new taxonomy of sovereign investors and show the emergence of two main institutional models: the “professional global investor”, supported by democracies and the OECD; and the “user of global finance for domestic development”, which correlates with authoritarian governments and the Middle East. Contrary to studies led contemporary to the global financial crisis, this paper mitigates conclusions that sovereign investors are all heavily influenced by the values and expectations of global financial capitalism. Instead, we show that values related to State Capitalism are gaining legitimacy and being advertised using media traditionally associated with global financial capitalism. Keywords: path generation, state capitalism, global financial capitalism, institutional emergence, sovereign investors, sovereign wealth funds Acknowledgements: The authors wish to thank Prof. William Barnett, Prof. Justin Grimmer, Prof. Raymond Levitt, Prof. W. Richard Scott, Prof. Vedran Zerjav, the members of the Stanford Global Projects Center and the participants in the 2017 Engineering Project Organization Conference for useful comments on previous versions of this paper. Funding from the Global Projects Center supported this research. None of the above is responsible for any errors or omissions.

1

INTRODUCTION Globalization has become a common term to designate a uniformization of forms and practices among societies and organizations (Djelic & Quack, 2003b). It often assumes organizations will decouple from their local needs and customs to adopt structures and practices promoted by a globally dominant framework (Meyer & Rowan, 1977). An expansive body of work has described the content of this global framework for markets and finance in economic geography (G. L. Clark, 2008; Haberly, 2011; Monk, 2011; Wójcik, 2011a), while a neo-institutional perspective theorized its diffusion and resistance processes (DiMaggio & Powell, 1983; Drori, Meyer, & Hwang, 2006; Scott, 2013). However, another tradition has underlined the persistence of local frameworks, openly or covertly resisting the globally dominant framework, using the concepts of “path dependence” and “variety of capitalism” (Hall & Soskice, 2001; Hall & Thelen, 2009; Marquis & Battilana, 2009). In practice, organizations grapple with both influences, with the possibility that similar organizations in one country adopt different models (Clark & Wójcik, 2005), and that one organization comply with each influence at different hierarchical levels or different moments in time (Djelic & Quack, 2003a). Djelic & Quack (2007) propose the concept of path generation to allow researchers to recognize organizations’ potential to adopt elements from both a global and local model and focus on the mechanism that supports their diffusion and potential co-existence. Using their distinction of a dominant and negotiated mode of institutionalization, this paper shows how the emerging group of sovereign investors respond to global and regional influences to define their identity and investments in their strategic communication. We use the whole community of sovereign investors to avoid the pitfall of choosing case studies particularly well adapted to one or the other perspective (Clark & Wójcik, 2005), and compare their relative influence on each and all organizations. ‘Sovereign investors’ include sovereign wealth funds and some public pension funds. They are owned by governments but separate from ministries and central banks, and they seek to maximize both national interest and financial returns. The number and size of assets under management of sovereign investors, USD 11 trillion managed by 83 organizations in our dataset, makes sovereign investors an important object of study. Professional

2

associations and international organizations increasingly bring together these actors under one umbrella to discuss both regulations and investment strategies (G20/Oecd, 2013; PWC, 2016; Warren, 2014), which could homogenize these organizations despite their many differences in size, age, mission, geography, and source of capital. However, the global financial crisis destabilized this community, making other voices heard than international organizations’ support for the dominant global financial capitalism framework (Fligstein & McAdam, 2012). This paper aims to parse out the influence of different spatial levels on sovereign investors’ communication about their identity. Providing this broad multilevel view on the community of sovereign investors is now possible thanks to the availability of websites and annual reports for 57 out of the 83 organizations identified as sovereign investors, the largest set yet utilized for a qualitative study. Also, the development of computer-assisted text analysis algorithms allows for a systematic analysis of texts’ content and of the influence of external factors, such as region and political system, on this content. This paper presents the first large-scale taxonomy based on sovereign investors’ declared identity. It shows that two opposite models are dominant among sovereign investors. One promotes investing solely for financial returns and is supported by North America and the OECD. The other and most common one promotes domestic development through finance and correlates with authoritarian regimes and the Middle East. These findings show that global financial capitalism seems to have lost its hegemony and that another model of using finance for national development, also called state capitalism (Musacchio & Lazzarini, 2014), is gaining legitimacy on the global scene. While state capitalism has a long tradition and is legitimate regionally and nationally, this study shows an unexpected increase in its global legitimacy. Indeed, sovereign investors do not hesitate to use annual reports, a medium traditionally associated with rationality, transparency, and independence from politics to convey state capitalism’s preference for national development to a global audience.

TWO MODES OF INSTITUTION BUILDING AT THE TRANSNATIONAL LEVEL The number of governments to launch new sovereign investors has spiked in recent decades. In parallel, a growing number of these organizations publish annual reports (See Figure 1). 3

This growth in fund creation and communication is a sign of institutional emergence, a process by which a community defines its rules and values (Scott, 2013). F IGURE 1: EVOLUTION OF THE NUMBER OF SOVEREIGN INVESTORS CREATED PER DECADE AND NUMBER OF THOSE FUNDS WHO PUBLISHED AN ANNUAL REPORT IN 2015 Number of sovereign investors created per decade and number who published an annual report in 2015 40 35 30 25 20 15 10 5 0

34

24

21

18 11 3

3

before 1956

2

1

1956-1965

3

6

5

8

1

1966-1975

1976-1885

1886-1995

1996-2005

2006-2016

Number of SIs created per decade - All SIs Number of SIs created per decade - SIs publishing an annual report in 2015

As these organizations were created, observers favoring the globalization thesis have posited that they would comply with the rules and values of global financial capitalism (Dixon & Monk, 2012), while others posited that they would stay vehicles for national geopolitical interests, in line with theses of path dependence and variety of capitalism (Balding, 2009; Lavelle, 2008). Djelic & Quack (2003a) propose to reconcile these views by recognizing that organizations that have international activities create their identity as a transnational group at the intersection of global and local influences. They sometimes adopt more elements from a global framework through a dominant mode of diffusion, sometimes reflect local expectations through a negotiation mode of diffusion. This typology guides our literature review and hypotheses about the institutional levels likely to influence sovereign investors’ communication of their missions and investment strategies.

DOMINANT MODE: GLOBAL FINANCIAL CAPITALISM A first hypothesis is that Sovereign investors’ increase in numbers and activities on foreign markets make them subject to expectations from Global Financial Capitalism, developed 4

for international private investment companies based on neo-liberal economics and capitalism (Monk, 2011a). Faced with a lack of international legitimacy and fears from the governments of Western countries in which they predominantly invest, sovereign investors must comply with the logic of the Market. In this logic, the share price gives legitimacy to the investor’s activities, the norm is financial self-interest, and actors’ goal should be limited to increasing financial profits (Thornton, Ocasio, & Lounsbury, 2012). In 2012, Dixon & Monk reported that soft laws crafted by international organizations, and notably the International Forum of Sovereign Wealth Funds (IFSWF) through the Santiago Principles, pushed sovereign investors to prioritize short-term results and publicly demonstrate performance, transparency and routine disclosure to keep access to global financial markets (Dixon & Monk, 2012; Truman, 2010). Responding to Western industrialized economies’ pressure, sovereign investors “match, mimic, or approximate the management structure and governance practices of Western institutional investors”, a model “readily identified in global financial markets” (Clark & Monk, 2010; Monk, 2011a). Expectations from this dominant model of finance are that sovereign investors will show their compliance with requirements of transparency and accountability as enounced in the Santiago Principles, notably Principle 11, “An annual report and accompanying financial statements on the SWF’s operations and performance should be prepared in a timely fashion and in accordance with recognized international or national accounting standards in a consistent manner” and Principle 12, “The SWF’s operations and financial statements should be audited annually.” This leads us to posit the following about sovereign investors’ communication: Hypothesis 1A: The vocabulary of global financial capitalism is dominant in annual reports and websites. Hypothesis 1B: Sovereign investors downplay or do not talk about their national development missions. International organizations dominated by the West, such as the OECD and the IFSWF, are likely to be carriers of this dominant framework, leading us to posit a positive correlation 5

between membership in these organizations and compliance with Global Financial Capitalism (Hawley & Williams, 2005). Sovereign investors also comply with this dominant framework because of their international activities, leading to the hypothesis that membership in international organizations also correlates with complying with Global Financial Capitalism. Table 1 summarizes these expectations. TABLE 1: EXPECTED CORRELATIONS BETWEEN INTERNATIONAL ORGANIZATIONS AND COMPLIANCE WITH THE DOMINANT FRAMEWORK OF GLOBAL FINANCIAL CAPITALISM

Outcomes Factors Membership in the IFSWF Membership in the OECD Membership in international organizations

Publication of an annual report in 2015

Publication of financial statements in 2015

+

+

Predominant use of the vocabulary of Global Financial Capitalism +

+

+

+

+

+

+

NEGOTIATION MODE: A MULTIPOLAR WORLD AND THE PURSUIT OF NATIONAL INTERESTS Although the Santiago Principles portrayed primarily the vision of the West, they were the product of negotiations that revealed regional and national differences. They happened in a context of geopolitical reversal in which many developing countries that used to be debtors were becoming creditors, reversing the historical flow of capital between OECD countries and emerging markets. This power reversal increased, and the legitimacy of global financial capitalism decreased with the 2009 global financial crisis. Shortly after the Santiago Principles were released, observers saw little change in SWFs’ public disclosure and underlined the risk that these principles would not be applied because of the lack of coercive power of the IFSWF (Mehrpouya, 2015). These might reduce the Santiago Principles’ impact on sovereign investors’ communication, and regional differences already apparent during the Santiago Principles’ negotiations might reappear. Transparency was a key point of contention, seen as a public right by Northern European

6

SWFs (Clark & Monk, 2010), a necessity to continue to invest in the West for Asian SWFs, and a danger for Middle-Eastern SWFs (Mehrpouya, 2015). Sovereign investors could therefore reappear as nationalistic tools, allowing their state sponsors to push institutions, plans and policies that would be threatened by the open and competitive world advocated by Global Financial Capitalism, and protect domestic economies from global forces (Monk, 2011a). This view leads us to posit that sovereign investors are more likely to portray a multipolar world, where the values and interests of different coalitions of nations and political models are visible. In that context, sovereign investors from the West at the origin of the values and rules of global financial capitalism will abide by it, while sovereign investors from other regions will propose different models. Developing and authoritarian countries would notably support government actions in private spheres, development missions and South-South alliances (Halliday and Carruthers, 2009). These considerations support the following alternative hypothesis: Hypothesis 2: Sovereign investors will communicate alternative identities and investment models to the one of global financial capitalism, which will correlate with regional and political factors.

METHODOLOGY AND DATA Almost ten years after the publication of the Santiago Principles and the global financial crisis, this paper seeks first to describe the different missions and investment strategies of sovereign investors; and second to compare the influence of international organizations that supports a standardized model for the community, to regions and political systems that resist this homogenization. This endeavor translates into the following two empirical research questions: 1. What topics did sovereign investors use to describe their missions and investment strategies in 2016-2017 through websites and 2015 annual reports? 2. Do international organization membership, regions and political regimes correlate with: a. whether they publish an annual report; 7

b. whether they publish financial statements; c. the topics they use to describe their missions; d. the topics they use to describe their investment strategies? Gathering the data involved five steps. First, we established a list of sovereign investors, using lists from PwC (2016) and the Sovereign Wealth Center, completed with members of four international organizations gathering government-owned institutional investors (Monk, Sharma, & Sinclair, 2017), and sovereign development funds identified by Clark & Monk (2015). From this list of 167 organizations from eight sources, we retained the 83 organizations listed by at least two sources (Appendix A lists these organizations). Second, we gathered the following descriptive factors: region of origin as classified by the World Bank1, democracy index of the country of origin (The Economist Intelligence Unit, 2016), year established, assets under management, membership in professional organizations (institutional investors roundtable, long-term investors’ club, IFSWF, forum mondial des caisses des depôts et consignations). Because we perform statistical analyses on a small population, we show the distribution of SIs according to those factors to check that there are enough data points corresponding to different values for each factor. Figure 2 shows the distribution of the population per number of international organizations they are a member of, for all 83 sovereign investors and the 57 with an annual report or website. Figure 3 shows the distribution per region for each group.

1

https://data.worldbank.org/country

8

F IGURE 2: DISTRIBUTION OF SOVEREIGN INVESTORS (SIS) PER NUMBER OF INTERNATIONAL ORGANIZATIONS THEY ARE A MEMBER OF

Number and share of SIs per number of clubs they are a member of 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Number of SIs who published a 2015 annual report per number of clubs 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

3 6 35

39

3 6

28

20

Number of clubs

Number of clubs 0

1

2

0

3

1

2

3

F IGURE 3: NUMBER OF SOVEREIGN INVESTORS WHO PUBLISHED AND DID NOT PUBLISH A 2015 REPORT PER REGION Number of Sovereign Investors per Region 25 20

6

15 10 5 0

3 3

7

8

1

1

17

13

11

11

2

Sub-saharan Latin Africa America & Carribean

North America

Europe & Middle East East Asia & Central Asia & North Pacific Africa

SIs who published a 2015 annual report

SIs without 2015 annual report

In the analysis, a numerical index of democracy is used to compute correlations. However, the Economist Intelligence Unit also provides a qualitative classification based on this index, which we use to show the distribution of our populations per type of political regime in Figure 4.

9

F IGURE 4: SHARE OF SOVEREIGN REPORT) PER REGIME TYPE

INVESTORS (TOTAL AND WHO PUBLISHED A

Share of total number of SIs per regime type

Share of SIs publishing an annual report per regime type

Full Democraci es 25%

Authoritar ian 41%

Hybrid regimes 6%

2015

Authoritar ian 39%

Flawed Democraci es 28%

Hybrid regimes 3%

Full Democraci es 33%

Flawed Democraci es 25%

As a third step, we looked for annual reports, financial statements and websites for these organizations in 2015 through a manual online search. Fourth, we collected the content of annual reports for the organizations that published one for the year 2015. Fifth, we collected the information available on the websites of organizations that had one but no annual report in 20172.

ANALYZING THE CONTENT OF ANNUAL REPORTS AND WEBSITES: STRUCTURAL TOPIC MODELING We use computer-assisted text analysis to group sovereign investors. More precisely, we use unsupervised learning, a bottom-up approach in which the researcher interprets topics proposed by an algorithm based on co-occurrence and frequency of word use in a collection of texts (Grimmer & Stewart, 2013). Blei, Carin, & Dunson (2010) underline that it is an alternative to manual coding in which a human reader would assign a topic to each word.

2

The difference in year between the annual report and website is explained by the fact that annual reports are published one to two years after the year they assess. The most recent annual report available for the largest amount of funds when the data was gathered in 2017 was the 2015 annual report. The potential difference in time between the websites and annual reports is also limited by the fact that the information gathered is part of the core of the website and not updated very frequently. 10

Here, the Latent Dirichlet Allocation (LDA) method assigns a topic to each meaningful word in the text. LDA is built on the intuition that each document will feature a limited number of topics, with a different distribution of these topics. In this study, the intuition is that an annual report will feature several orientations in different proportions. Previous literature based on human reading of some of these reports and interviews with sovereign investors identified some of those, and we compared these typologies to the groups given by the algorithm to verify the validity of the analysis. We found correlations between our groups and the types pension funds, sovereign development funds and sovereign wealth funds, which increased our confidence in the groups given by the algorithm. Our analysis goes beyond existing typologies (Monk, 2011; PWC, 2016) to show how topics are distributed among the whole population of sovereign investors, and test the influence of external factors on the use of these topics. Although with 57 organizations, the number of documents in this study might seem small, they amount to 3238 pages of text. We use an algorithm called “Structural Topic Modeling”, available through the ‘stm package’ in R (Roberts, Stewart, & Tingley, 2015a). This method builds on Latent Dirichlet Allocation (LDA) and allows researchers to discover topics and estimate their relationship to external characteristics attached to each document such as the country of the SWF that published it in our case (structuraltopicmodel.com, Lucas et al., 2012, 2015). Like LDA, this method is built on the idea that the researchers can set the number of topics present in the collection of documents a priori, then let the algorithm find which distribution of words over a fixed vocabulary constitutes a topic, and finally compute the share of topics for each document. Each word of the total vocabulary present in all documents appears in a topic with a different probability, enabling the researcher to assess a topic by looking at the words appearing most frequently in each topic, and comparatively between topics. The researcher can also see the distribution of topics in each document and use the documents that show a predominance of one topic to help his/her understanding of this topic. We refer to Blei et al. (2010), Grimmer & Stewart (2013), McFarland et al. (2013), Roberts, Stewart, & Tingley (2015b) for a complete description of the mathematical foundations, use and pitfalls of structural topic modeling. We also follow Grimmer & Stewart's (2013) recommendations to improve the robustness and usefulness 11

of the analysis when cleaning the texts, choosing the number of topics, naming the topics and validating the results. First, we performed the topic modeling analysis on sections of annual reports, namely the missions, and the investment strategies, to ease the interpretation of the analysis and limit the number of topics present. We also stripped the texts of “stop words” and words with very low frequency but checked that the total number of words did not go too low and that no document was left out after this procedure. We chose the order of magnitude of the number of topics based on the authors’ knowledge of the texts and confirmed it with tests of dispersion, exclusivity, held-out likelihood and semantic coherence recommended in the literature (Mimno, Wallach, Talley, Leenders, & McCallum, 2011; Roberts et al., 2014; Wallach, Murray, Salakhutdinov, & Mimno, 2009). Finally, the vocabulary appearing in each topic, and the graphs comparing the frequency of words between two topics were used to name the topics. We validated the topics and groups of organizations proposed by the algorithm qualitatively and by looking at the correlation between missions found by the algorithm and the categories of missions proposed in the literature (results available upon request).

ANALYZING THE INFLUENCE OF EXTERNAL FACTORS ON THE PUBLICATION OF ANNUAL REPORTS The correlation of external factors with the fact of publishing an annual report and financial statements was also tested using the package glm in R, specifying the family type to ‘probit’, and the package ‘lrm’, which uses a logit model and gives more tests, notably an equivalent of R2 for logistic regressions. Several models allowed to separate variables that overlapped, most notably regions, political regimes and OECD. Although the dataset is small (83 organizations), it represents the whole population of sovereign investors and not a sample. We also showed that the factors tested have enough datapoints for each value to yield good results. Although there are limits to statistics with such a small dataset, we think the results show great potential and that their robustness could be tested in the future by including more years to increase the size of the dataset.

12

ANALYSIS The analysis is presented in two steps. First, a new taxonomy of sovereign investors based on the content of their annual reports and websites is proposed, with five missions and seven investment strategies. This taxonomy shows that development is a more common theme than many would expect. Second, we test the hypotheses regarding the influence of international organizations, regions and political regimes on both sovereign investors’ decision to publish an annual report, and the main topic they feature in their communication.

THE PREPONDERANCE OF DEVELOPMENT AS A MISSION AND INVESTMENT STRATEGY Looking at the missions and visions of sovereign investors, structural topic modeling yields the most frequent words for five topics. The first author named these topics based on these words as shown in Table 2, focusing particularly on words that are unique to each topic. Generic investment terms appear in several topics, indicating the common investment activities of these organizations. TABLE 2: TOPIC LABEL AND MOST

FREQUENT WORDS FOR THE MISSIONS, VISIONS AND

VALUES OF SOVEREIGN INVESTORS

Particularly relevant to our hypotheses are topic 2 “global professional investor” and topic 5 “investing for domestic development”. Topic 2 corresponds to the values and frameworks of private investing and the guidelines sponsored by the Santiago Principles. On the 13

contrary, topic 5 represents a vision of sovereign investors as a way for governments to use finance for national development. Topic 4, which we call ‘administration and stabilization’ denotes traditional government functions. Topic 1 and 3 echo missions of sovereign wealth funds described in the literature, diversification from the local economy for stabilization purposes and long-term investing. Figure 5 shows the proportion of each topic in the full corpus of annual reports and websites, making clear that investing for domestic development is the most common mission for sovereign investors. Topic 2, using the vocabulary of private investing is the second most common topic. F IGURE 5: P REPONDERANCE

OF EACH TOPIC IN THE DECLARED MISSIONS OF

57

SOVEREIGN INVESTORS

Based on these figures, hypothesis 1A stating that sovereign investors would communicate to appease the fear the West and conform with the norms of private investment in their communication, is not verified. To understand further the multiplicity of identities, we study which sovereign investors claim which identity. Table 3 lists the funds that use predominantly one topic to describe their missions, vision and values. TABLE 3: F UNDS PREDOMINANTLY USING WORDS FROM ONE TOPIC Funds with >90% for one topic 1. Storing 2. Global national wealth professional internationally investor

3. Long-term market investments

14

4. Administration and stabilization

5. Investing for domestic development

JSC SamrukKazyna (Khazakhstan)

CPPIB (Canada)

Hong Kong Monetary Authority Exchange Fund JSC National Investment Corp. of National Bank of Kazakhstan National Pension Service (Japan)

British Columbia investment management corp. (Canada) Alberta investment management corp. (Canada) Ontario teachers’ pension plan (Canada) North Dakota legacy fund (USA) Ontario municipal employees retirement system (Canada) Employees provident fund kwsp (Malaysia) QIC (Australia)

National Fund of the Republic of Kazakhstan CDP Equity Italian strategic fund

Pension reserve fund and economic and social stabilization fund (Chile) Petroleum fund of Timor Leste

State administration of foreign exchange (China)

Bahrain Mumtalakat Holding Company

APG (Netherlands)

Caisse des depots et consignations (France)

Heritage and stabilization fund (Trinidad & Tobago) Alaska permanent fund (USA)

Government pension investment fund (Japan) National council for social security fund (China)

Public Investment Fund (South Africa)

National Wealth Fund (Russia)

Mubadala Development Co. (UAE) Russian Direct Investment Fund

Alaska permanent fund (USA)

Palestine Investment Fund

Western Australia future fund (Australia) TIAA-CREF (USA)

Khazanah (Malaysia)

15

Investment Corp. of Dubai State Capital Investment Corporation (Vietnam) Emirates Investment Authority (UAE) Temasek Holding (Singapore) Qatar Investment Authority Abu Dhabi Investment Council State General Reserve Fund of the Sultanate of Oman

The same categorization exercise is led on the investment strategies and risk management parts of annual reports and websites, using seven categories. Not surprisingly, all the topics heavily feature words from the investment vocabulary. However, several topics emerge from studying the second layer of most frequent words, as shown in Table 4. TABLE 4:

SEVEN TOPICS AND THEIR MOST FREQUENT WORDS FOR INVESTMENT STRATEGIES (IN BOLD THE MOST COMMON STRATEGIES)

1

Risk management

2

Overall portfolio management and market risks

3

Managing portfolio and fund to maximize returns using the market Managing portfolio to reduce risk using the market

4

5

Active investment: focus on team and strategy

6

Investing in the real economy for development

7

Investing for future generation, focus on returns and public more than risk

Manage, risk, control, committee, board, system, ensure, provide, effect Manage, fund, risk, portfolio, company, market, sector, growth, economy, companies, equity, performance return, portfolio, year, asset, market, fund, percent, bond, global, benchmark Portfolio, risk, manage, asset, return, perform, fund, account, bond, secur, exchange, account, index, credit, bank, liquid, stock, bond, financi, dollar Invest, manage, portfolio, fund, risk, market, return, strategy, global, perform, estate, activ, team, opportun Invest, develop, companies, sector, project, growth, region, economi, industry, infrastructure, will, business, nation Invest, fund, plan, pension, asset, return, rate, member, contribut, manag, benefit, policy, board, benchmark

Figure 6 shows the predominance of these topics in our population of sovereign investors. The focus on the skills of the team is predominant and might be a sign of professionalization of sovereign investors and lesser reliance on external managers. Investing in the real economy for development is the second most common theme, albeit closely followed by managing for market returns, which was traditionally the main activity of sovereign investors and aligned with the values of global financial capitalism. This predominance shows that contrary to hypothesis 1B, even when talking about investment strategy, development is a predominant topic. Hypothesis 1B is therefore not verified. These results also show that existing categories of missions and types of funds hide a wider variety of investment strategies. For reference, we show in Table 5 the funds that feature one investment strategy predominantly.

16

F IGURE 6: P REDOMINANCE

OF TOPICS IN THE INVESTMENT STRATEGY SECTION OF

57

SOVEREIGN INVESTORS

TABLE 5: F UNDS USING ALMOST EXCLUSIVELY ONE TOPIC TO DESCRIBE THEIR INVESTMENT STRATEGY

Funds using almost exclusively one topic 1 2 3 Risk Overall Managing management portfolio portfolio management for returns & market on the risks market PGGM Public Alberta Investment Heritage Corp Savings Trust Fund APG CDP equity Alaska Permanent Fund Employees Provident Fund KWSP

State Capital Investment Corporation

Petroleum Fund of Timor Leste

4 Managing portfolio to reduce risk using market

5 Active investment: focus on team and strategy

6 Investing in real economy for development

7 Investing for future generations

TIAA CREF

Future Fund

Palestine Investment Fund

North Dakota Legacy Fund

National Wealth Fund

Qatar Investment Authority

Pension reserve fund and economic and social stabilization fund

CPPIB

Russian Direct Investment Fund Khazanah

Government Pension Investment Fund Kuwait Investment Authority

17

Caisse des dépôts et consignations

JSC Samruk Kazyna

National council for social security fund

Norges Fonds de Bank réserve pour Investment les retraites Management New Mexico Western State Australian Investment Future Fund Council CDPQ State Oil Fund of the Republic of Azerbaijan

GIC

Public Investment Fund

Ontario Teachers’ Pension Plan

ADIA

Investment Corp. of Dubai

New Zealand Superannuation Fund

Bahrain Mumtalakat Holding Company

National Pension Service (Japan) Ontario Municipal Employees Retirement System

Mubadala

Having found a predominance of development themes in both missions and investment strategy, we study the homogeneity of this identity and show in Table 6 how organizations that describe their missions as primarily developmental describe their investment strategies. TABLE 6: COMPARING

FUNDS WITH A DEVELOPMENT MISSION TO THEIR INVESTMENT

STRATEGIES

Bahrain Mumtalakat Holding Company Investment Corp. of Dubai Khazanah Mubadala Development Co. Palestine Investment Fund Public Investment Fund Russian Direct Investment Fund Temasek Holding (Singapore) Emirates Investment Authority Abu Dhabi Investment Council

Mission

Investment strategy

Type

Country

Domestic development Domestic development Domestic development Domestic development Domestic development Domestic development Domestic development Domestic development

Real assets for development

SDF

Bahrain

Member of club? No club


SWF

UAE

No club


SDF

Malaysia

IFSWF


SDF

UAE

LTIC


SDF

Palestine

IFSWF


SDF

No club


SDF

Saudi Arabia Russia

SDF

IFSWF & IIR Singapore IIR

SWF

UAE

No club

SWF

UAE

No club

Active investment (focus on team and strategy) (51%) & real assets for domestic development (32%) Domestic Active investment (focus on team development and strategy) (65%) & real assets for domestic development (27%) Domestic Active investment (focus on team development and strategy) (67%) & real assets for domestic development (26%)

18

Qatar Investment Authority State General Reserve Fund of the Sultanate of Oman State Capital Investment Corporation Caisse des depots et consignations (France)

Domestic development Domestic development

Active investment, focus on team and strategy (96%) Development (42%), Managing portfolio and fund for returns using the market (21%) and Active investment (30%) Domestic Overall portfolio management development and market risks (69%) & Development (24%) Domestic Risk management (95%) development

SWF

Qatar

IFSWF

SWF

Oman

IFSWF

SDF

Vietnam

No club

SWF

France

LTIC & IIR

Seven out of ten of the sovereign investors with a clear developmental mission also adopt an investment strategy predominantly focused on investing in real assets for development. This shows that development is emerging as a strong and legitimate identity among sovereign wealth funds. For four others, active investment with a focus on team and strategy is the other predominant topic. Among the funds at the forefront of development as a mission and investment strategy, five are from the Middle East, two from South-East Asia and one from Russia. Among the 14 with a development mission, nine are from the Middle East. This observation hints toward a regional influence. This taxonomy emphasizes two main models for sovereign investors, one mimicking global private investors, and one emphasizing development. If these two models seem incompatible and are mostly separate, there are five funds that do combine them in describing their missions: GIC (Singapore), ADIA (UAE), CDPQ (Canada), CIC (China) and KIC (South Korea). These organizations are leaders in their countries, are among the largest ones in the world, and are active both on domestic and foreign markets (Dixon & Monk, 2012; Haberly, 2011). GIC and ADIA were also part of the negotiations of the Santiago Principles. The use of both vocabularies might indicate that both models are powerful on the international scene. Mixing both topics leave a door open to these funds to emphasize one or the other in their daily activities, depending on their audience.

INFLUENCE

OF EXTERNAL FACTORS ON THE COMMUNICATION STRATEGY OF SOVEREIGN

INVESTORS

Building on the new taxonomy presented above and on the record of which sovereign investor publish or not an annual report, statistical analyses enable us to assess the influence 19

of international organizations, regions and political regimes on three outcomes: the publication of an annual report, the publication of financial statements, and the vocabulary they use in their annual reports and websites. We present the results of these analyses by outcome. PUBLICATION OF AN ANNUAL REPORT AND FINANCIAL STATEMENTS

We built three models separating factors that describe the global and regional levels but describe overlapping realities: Region, OECD and Democratic scores. For each model, we use a logistic regression, probit and logit model, and an analysis of variance to test how much each factor contributes to improving the model. Table 7 shows the results for the outcome ‘publication of a 2015 annual report’, while Table 8 shows them for the outcome ‘publication of audited financial statements’. We find consistently significant positive correlations between publishing an annual report and being part of international clubs and from an OECD country. To a lesser extent, managing more money correlates with publishing an annul report. We only find a significant positive correlation between being from an OECD country and publishing audited financial statements. TABLE 7: RESULTS

FROM LOGISTIC MODELS FOR THE PUBLICATION OF AN ANNUAL

REPORT

Model 1 Outcome Factors

Model 2

Model 3

Number of Clubs + Democratic Score + Year established + log(AUM)

Number of Clubs + Region + Year established + log(AUM)

Intercept

2015 Annual Report Number of Clubs + OECD + Year established + log(AUM) Coeff. Wald Estimate Pr(>|z|) -3.457 0.865

# of clubs

0.876

0.005

**

# of clubs

0.880

0.003

OECD

1.610

0.001

**

0.287

0.000

Year

0.001

0.898

Dem Score Year

0.007

0.413

log(AUM)

0.139

0.028

log(AUM)

0.137

0.031

Probit model

*

Intercept

Coeff. Estimate -15.615

Wald Pr(>|z|) 0.352

20

East Asia & Pacific ** Europe & Central Asia *** Latin America Middle East & N. Africa * N. America Subsaharan Africa

Coeff. Wald: Estimate Pr(>|z|) 1.710 0.935 2.263

0.914

1.869

0.929

0.844

0.968

3.101

0.882

1.344

0.948

AIC score lrm package (logit) Intercept

84.013 Coeff. Estimate -2.928

AIC score Wald: Pr(>|z|) 0.932

# of clubs

1.545

0.005

OECD

2.973

0.003

Year

0.007

0.966

log(AUM)

0.237

0.034

# of clubs Year log(AUM) AIC score

Intercept

82.383 Coeff. Estimate -26.006

Wald Pr(>|z|) 0.389

**

# of clubs

1.496

0.004

**

Dem Score Year

0.485

0.001

0.011

0.449

log(AUM)

0.232

0.038

*

East Asia & Pacific ** Europe & Central Asia *** Latin America Middle East & North Africa * N. America Subsaharan Africa # of clubs Year log(AUM)

Discrimination indexes (lrm package) R2 0.481 R2 0.48 g 2.502 g 2.29 gr 12.212 gr 9.88 gp 0.332 gp 0.339 Brier 0.146 Brier 0.146 ANOVA (significance for each factor added to the model with all other factors) Deviance Pr Deviance Pr residual (>Chi) residual (>Chi) # of clubs 9.295 0.002 ** # of clubs 10.221 0.001 ** OECD 14.489 0.000 *** Dem 16.119 6 E-05 *** Score log(AUM) 4.986 0.026 * log(AUM) 5.127 0.024 *

1.007 -0.001 0.129 92.169 Coeff. Estimate 3.475

0.003 0.917 0.065

**

0.910

0.354

0.267

0.788

-1.448

0.060

2.347

0.105

-0.562

0.618

1.690 -0.002 0.221

0.004 0.900 0.065

**

.

Wald: Pr(>|z|) 0.920

.

R2 g gr gp Brier

0.46 2.365 10.639 0.331 0.152

# of clubs Region

11.4256 14.3402

7 E-04 0.026

*** *

log(AUM)

3.6786

0.055

.

Significance codes are: 0 < ‘***’ < 0.001 < ‘**’ < 0.01 < ‘*’ < 0.05 < ‘.’ < 0.1 < ‘ ’ < 1 TABLE 8: RESULTS FROM LOGISTIC MODELS FOR THE PUBLICATION OF AUDITED FINANCIAL STATEMENTS

Model 1 Outcome Factors

Model 2

Model 3

Audited Financial statements Number of Clubs + OECD + Number of Clubs + Democratic Score Year established + log(AUM) + Year established + log(AUM) Probit model (glm package)

21

Number of Clubs + Region + Year established + log(AUM)

Coeff. Estimate

Wald: Pr(>|z|)

Intercept

-8.352

0.483

OECD

1.201

4 E-04

Year

0.003

# of clubs

log(AUM)


0.324

*** Dem

0.22663

3 E-04

0.526

Year

0.00474

0.402

0.264

0.233

# of clubs

0.31198

0.1525

0.072

0.191

log(AUM)

0.07106

0.2016

AIC score 104.910 lrm package (logit) Coeff. Estimate Intercept -13.041

Intercept

AIC score Wald: Pr(>|z|) 0.522

Intercept

-16.861

0.371

0.3684

5 E-04

OECD

1.9762

7 E-04

Year

0.006

0.565

Year

0.007

0.4543

# of clubs

0.424

0.257

# of clubs

0.5068

0.1676

log(AUM)

0.121

0.193

AUM

0.114

0.2202

Discrimination indexes (lrm package) R2 0.283 g 1.237 gr 3.445 gp 0.262 Brier 0.194

*** Dem

104.240

R2 g gr gp Brier

0.29 1.318 3.735 0.276 0.194

22

East Asia & Pacific *** Europe & Central Asia Latin America Middle East & N. Africa N. America Subsaharan Africa # of clubs Year log(AUM) AIC score

East Asia & Pacific *** Europe & Central Asia Latin America Middle East & N. Africa N. America Subsaharan Africa # of clubs Year log(AUM) R2 g gr gp Brier

-7.388

Wald Pr (>|z|) 0.532

-6.326

0.591

-7.603

0.519

-7.871

0.506

-6.076

0.607

-6.868

0.559

0.227 0.003 0.078 108.25

0.307 0.57 0.212


Wald Pr(>|z|) 0.622

1.721

0.034

-0.326

0.739

a -0.845

0.242

2.205

0.021

0.860

0.390

0.4047 0.004 0.137

0.288 0.663 0.205

0.343 1.478 4.384 0.299 0.179

*

ANOVA (significance for each factor added to the model with all other factors) Deviance Pr (>Chi) Deviance Pr residual residual (>Chi) # of clubs 1.457 0.228 # of clubs 2.073 0.150 OECD 13.521 2E-04 *** Dem 14.190 2E-04 Score log(AUM) 1.754 0.185 log(AUM) 1.629 0.202 # of clubs 3.859 0.050 * # of clubs 3.859 0.050 compared compared to model to model without without OECD Dem score

# of clubs *** Region log(AUM)

Deviance residual 1.066 18.2445

Pr (>Chi) 0.302 0.006

1.595

0.207

*

We also test the influence of each international club separately and find a significant correlation only for the IFSWF and the publication of an annual report, although with a low level of significance (coefficient of 0.5616, Pr(>|z|) of 0.0664). ANNUAL REPORTS’ CONTENT

The stm package gives correlations between topics and external factors through the command “estimateEffect” 3. We report only the significant correlations obtained through this command in Table 9. TABLE 9: CORRELATIONS

BETWEEN EXTERNAL FACTORS AND TOPICS IN ANNUAL

REPORTS

Investment Strategy

Mission

OECD Global financial investor Domestic development Managing portfolio for returns using the market Investing in real assets for development Active investment, focus on team and strategy

3

IIR

Coeff. 0.324

Pr(>|t|) 1.04E-03 ***

-0.396

2.74E-04 *** 2.77E-02 *

0.566

3.08E-03 **

0.289

0.218

-0.291

Coeff. Pr(>|t|) 0.285 1.22E02 *

Middle East & North Africa Coeff. Pr(>|t|)

North America Coeff. 0.324

8.43E05 *** 0.3264

0.240

Pr(>|t|) 0.013*

0.05

1.99E02 *

Democracy Score Coeff. 0.070

Pr(>|t|) 2.4E-04 ***

-0.08

5.95E05 *** 6.92E03 **

0.043

-0.056

3.3E02 *

https://www.rdocumentation.org/packages/stm/versions/1.3.3/topics/estimateEffect 23

5.78E04 ***

**

We observed significant correlations for two missions and three investment strategies. The two missions correspond to the two models identified previously: ‘Global Financial Investor’ carries the values of global financial capitalism, while ‘Domestic Development’ favors proximity with the national agenda and support to the domestic economy. These two missions correspond to two investment strategies, respectively ‘managing portfolio for returns using the market’ and ‘investing in real assets for development’.

RESULTS We now compare the results from the analysis to the hypotheses made in the review of the literature.

DOMINANT MODE: A SMALLER EFFECT THAN EXPECTED Regarding the dominant mode of diffusion, hypotheses 1A and 1B did not hold as development was a major topic in missions and investment strategies. Regarding the influence of international organizations on sovereign investors’ compliance with expectations of transparency, accounting and financial-return seeking behaviors, Table 10 mirrors Table 1 to show which correlations were found and which were not. TABLE 10: TABLE 1 UPDATED WITH CORRELATIONS OBSERVED Outcomes Publication of an annual report

Publication of financial statements

+

0

Predominant use of the vocabulary of Global financial capitalism 0

+

+

+

+

0

0

Factors Membership in the IFSWF Membership in the OECD Membership in international organizations

The hypothesis that being a member of the IFSWF would lead to compliance with the dominant logic of global financial capitalism isn’t completely verified. It does go with the publication of an annual report, but not with the publication of financial statements nor the 24

predominant use of the vocabulary of global financial capitalism. Membership in international organizations has the same effect. However, being from a country that is a member of the OECD does correlate with all three signs of compliance with the Market logic. These results confirm that sovereign investors from the West communicate on their missions and investment strategies using the vocabulary of global financial capitalism. However, this logic supposed to be globally dominant does not influence other sovereign investors as much as expected. Instead, sovereign investors who choose to position themselves internationally seem to have taken the opportunity to communicate other values through annual reports.

NEGOTIATION MODE: TWO MODELS SUPPORTED BY TWO REGIONS AND POLITICAL REGIMES Our results show more support for the negotiation mode of diffusion, which posited that sovereign investors would communicate alternative identities and investment models to the one of global financial capitalism, and that those topics would correlate with regional and political factors. Indeed, we showed that the two predominant missions for sovereign investors who communicated through websites and a 2015 annual report correspond to two conflicting models: investing for development versus behaving like a global financial investor. These two models correlate with two regions of the world, the Middle East and North Africa for the first one, and North America for the second one. Beyond regions, these models also correlate with a low democratic score for the first one, and a high democratic score for the second one. The same dichotomy appears with topics used to describe investment strategies. Funds from the Middle East and North Africa positively correlate with the use of the topic of investing in the real economy for development while North American funds positively correlate with the topic of managing portfolio for returns using the market. In addition, the fact that large, established sovereign investors, primarily in Asia, mix in topics from both models support the idea that there are two dominant poles that these funds might want to appeal to in various situations. Instead of choosing and following a dominant view, they reflect the negotiation that is happening between these two models, and the usefulness of appealing to both when co-investing with different peers.

25

Two models are therefore emerging with the support of different political and regional blocks. This weakens the hypothesis that sovereign investors are mirroring a global order instead of the views of their national governments. More than a community of organizations building a common identity and on the path of standardization, sovereign investors are a field of confrontation between different views of the world supported by regional and political blocks.

CONCLUDING DISCUSSION This study proposed both a new taxonomy of sovereign investors based on how they describe their missions and investment strategies and an assessment of the global, regional and political factors influencing these types. First, the taxonomy proposed is built on the largest set yet, with 57 sovereign investors included. It featured five missions and seven investment strategies shown in Table 11. TABLE 11: FIVE MISSIONS AND SEVEN INVESTMENT STRATEGIES Taxonomy of missions

Taxonomy of investment strategies

1) Storing national wealth internationally 2) Global professional investments 3) Long-term market investments 4) Administration and stabilization 5) Investing for domestic development

1) Risk management 2) Overall portfolio management and market risks 3) Managing portfolio and fund to maximize returns using the market 4) Managing portfolio to reduce risk using the market 5) Active investment: focus on team and strategy 6) Investing in the real economy for development 7) Investing for future generation, focus on returns and public more than risk

Among those, we showed that two models are predominant: One follows the model of private investors and use the vocabulary of global finance while the other emphasizes using finance for national development. The results show that the negotiation mode describes best how sovereign investors are evolving as group. Indeed, global financial capitalism seemed to have failed to imprint its values and frameworks as the dominant topic in annual 26

reports and websites in 2016-2017. Instead, state capitalism as investing for national development is a strong contender to this Western vision. In addition, both visions are correlated with two regions and political regimes. The Middle-East and authoritarian regimes for development, and North-America and democracies for global financial capitalism. A potential explanation for this evolution consists in the disruption brought by the global financial crisis of 2009, at the same time as the community of sovereign investors was starting to organize through international organizations and professional clubs (Wójcik, 2011b). This crisis undermined the legitimacy of global financial capitalism. It also continued to reduce the coercive mechanisms available to Western international organizations. Indeed, Western economies were then looking for investments that could help their economies. In the absence of coercive mechanisms and legitimacy, a dominant mode of diffusion is powerless (M. Djelic & Quack, 2003a). On the contrary, nations with established sovereign funds with large amounts of capital saw their bargaining power increase, opening the door to a negotiation mode of diffusion of values and investment models among the community. This result aligns with studies by Yeung (1998) and (Hawley & Williams, 2005) notably, which contest the idea that globalization leads to a “borderless world” and the “end of geography”, and shows the strong influence of states’ political regimes and culture on finance, and their ability to support at the transnational level ideas that go against the dominant framework of global financial capitalism. Our results support an alternative to the story of path dependence and globalization when describing finance institutional investors. Indeed, the emphasis on regional and political influence breaks free from a focus on the past traditionally brought by path dependence to focus on present coalitions (Clark & Wójcik, 2005). It follows in the footsteps of previous studies in economic geography which showed a more nuanced picture than these theories would have predicted, notably Haberly's (2011) findings that strategic sovereign funds had to pragmatically manage the contemporary conditions of globalization and financialization and the strategies of local firms receiving their investments, and Clark & Wójcik's (2005) description of processes simultaneously reinforcing and endangering the German model of capitalism. We observe a co-existence of global and local forces and underline how they 27

lead to hybrid models. Indeed, some of the largest sovereign funds, notably in Asia, combine the vocabulary of global financial capitalism with the one of national development. This is the case of China’s CIC, South Korea’s KIC, Singapore’s GIC and UAE’s ADIA, which together account for 15% of the total capital managed by sovereign investors. We also show that global and local influences can co-exist in different aspects of the communication of sovereign investors. Sovereign investors largely adopted annual reports as a symbol of global financial capitalism, at a time when international organizations from the West had more legitimacy. As the power balance changed, they transformed this symbol and used it to communicate missions, identities and investment strategies aligned with their political and regional institutions. To conclude, this paper shows that the debate between varieties of capitalism linked to path dependence and the diffusion of a dominant global framework hides a reality in which organizations often react to both global and local pressures simultaneously and find ways to satisfy all of them through different means, including adopting symbols from one order while mixing in topics representing influences from other orders. This explains why some case studies might see the predominance of global influence when looking at symbols, while others might underline the predominance of politics when looking at missions. Looking at the whole population of sovereign investors enabled to show both. In the future, studies at the organization level, notably of the sovereign investors we identified as hybrid, could shed light on how these organizations manage these conflicts internally and through time, while a whole population study over several years could show trends and potential reversals between a dominant and negotiated mode of institutionalization of the community.

REFERENCES Balding, C. (2009). Who’s Afraid of Sovereign Wealth Funds? Revue d’economie Financiere, 201–210. Blei, D., Carin, L., & Dunson, D. (2010). Probabilistic topic models. IEEE Signal Processing Magazine, 27(6), 55–65. http://doi.org/10.1109/MSP.2010.938079 Clark, G. L. (2008). Governing Finance : Global Imperatives and the Challenge of Reconciling Community Representation with Expertise. Economic Geography, 84(3), 281–302. http://doi.org/10.1111/j.1944-8287.2008.tb00366.x Clark, G. L., & Wójcik, D. (2005). Path dependence and financial markets: The economic geography of the German model, 1997 - 2003. Environment and Planning A, 37(10), 28

1769–1791. http://doi.org/10.1068/a3724 Clark, G., & Monk, A. (2010a). The legitimacy and governance of Norway’s sovereign wealth fond: The ethics of global investment. Environment and Planning A, 42(7), 1723–1738. http://doi.org/10.1068/a42441 Clark, G., & Monk, A. H. B. (2010b). Sovereign Wealth Funds: Form and Function in the 21st century. Clark, P., & Monk, A. (2015). Sovereign Development Funds : Designing HighPerformance , Strategic Investment Institutions. DiMaggio, P., & Powell, W. (1983). The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160. Dixon, A. D., & Monk, A. H. B. (2012). Reconciling transparency and long-term investing within sovereign funds. Journal of Sustainable Finance & Investment, 37– 41. http://doi.org/10.1080/20430795.2012.703126 Djelic, M. L., & Quack, S. (2007). Overcoming path dependency: Path generation in open systems. Theory and Society, 36(2), 161–186. http://doi.org/10.1007/s11186007-9026-0 Djelic, M., & Quack, S. (2003a). Conclusion: Globalization as a double process of institutional change and institution building. In Globalization and Institutions: Redefining the Rules of the Economic Game. Djelic, M., & Quack, S. (2003b). Theoretical Building Blocks for a Research Agenda Linking Globalization and Institutions Towards a Typology of Institutional Arguments. In Globalization and Institutions: Redefining the Rules of the Economic Game. http://doi.org/10.4337/9781781950012.00010 Drori, G. S., Meyer, J. W., & Hwang, H. (2006). Introduction, 1–22. Fligstein, N., & McAdam, D. (2012). 1. The Gist of It. A theory of Fields. G20/Oecd. (2013). G20/OECD High-Level Principles on Long-Term Investment Financing by Institutional Investors. OECD Publishing. Grimmer, J., & Stewart, B. M. (2013). Text as data: The promise and pitfalls of automatic content analysis methods for political texts. Political Analysis, 21(3), 267–297. http://doi.org/10.1093/pan/mps028 Haberly, D. (2011). Strategic sovereign wealth fund investment and the new alliance capitalism: A network mapping investigation. Environment and Planning A, 43(8), 1833–1852. http://doi.org/10.1068/a43324 Hall, P. A., & Soskice, D. W. (2001). An introduction to varieties of capitalism. In P. Hall & D. Soskice (Eds.), Varieties of Capitalism: The Institutional Foundations of Comparative Advantage (p. chapter 16, page 540). Oxford: Oxford University Press. Hall, P., & Thelen, K. (2009). Institutional change in varieties of capitalism. SocioEconomic Review, (7), 7–34. Hawley, J. P., & Williams, A. T. (2005). Shifting ground: Emerging global corporate29

governance standards and the rise of fiduciary capitalism. Environment and Planning A, 37(11), 1995–2013. http://doi.org/10.1068/a3791 Lavelle, K. C. (2008). the Business of Governments: Nationalism in the Context of Sovereign Wealth Funds and State-Owned Enterprises. Journal of International Affairs, 62, 131–147. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=35581046&site= bsi-live Lucas, C., Nielsen, R. A., Roberts, M. E., Stewart, B. M., Storer, A., & Tingley, D. (2012). Online Appendix: Additional Text Preparation Details and A Review for Text Analysis Techniques for Comparativists. Political Analysis, 23(2), 1–23. Lucas, C., Nielsen, R. A., Roberts, M. E., Stewart, B. M., Storer, A., & Tingley, D. (2015). Computer-assisted text analysis for comparative politics. Political Analysis, 23(2). http://doi.org/10.1093/pan/mpu019 Marquis, C., & Battilana, J. (2009). Acting globally but thinking locally? The enduring influence of local communities on organizations. Research in Organizational Behavior, 29, 283–302. http://doi.org/10.1016/j.riob.2009.06.001 McFarland, D. A., Ramage, D., Chuang, J., Heer, J., Manning, C. D., & Jurafsky, D. (2013). Differentiating language usage through topic models. Poetics, 41(6), 607– 625. http://doi.org/10.1016/j.poetic.2013.06.004 Mehrpouya, A. (2015). Instituting a transnational accountability regime: The case of Sovereign Wealth Funds and “GAPP.” Accounting, Organizations and Society, 44, 15–36. http://doi.org/10.1016/j.aos.2015.05.001 Meyer, J. W., & Rowan, B. (1977). Institutionalized Organizations: Formal Structure as Myth and Ceremony. The American Journal of Sociology, 83(2). Mimno, D., Wallach, H. M., Talley, E., Leenders, M., & McCallum, A. (2011). Optimizing semantic coherence in topic models. Proceedings of the 2011 Conference on Empirical Methods in Natural Language Processing, (2), 262–272. Monk, A. (2011). Sovereignty in the era of global capitalism: the rise of sovereign wealth funds and the power of finance. Environment and Planning A, 43(8), 1813–1832. http://doi.org/10.1068/a43326 Monk, A., Sharma, R., & Sinclair, D. L. (2017). Reframing Finance New Models of Long-Term Investment Management. Stanford University Press. Musacchio, A., & Lazzarini, S. G. (2014). Reinventing State Capitalism Leviathan in Business, Brazil and Beyond. Harvard University Press. PWC. (2016). Sovereign Investors 2020 A growing force. Roberts, M. E., Stewart, B. M., & Tingley, D. (2015a). stm: R Package for Structural Topic Models. Journal of Statistical Software, VV(Ii). http://doi.org/10.18637/jss.v000.i00 Roberts, M. E., Stewart, B. M., & Tingley, D. (2015b). stm: R Package for Structural Topic Models. Journal of Statistical Software, VV(2014). 30

Roberts, M. E., Stewart, B. M., Tingley, D., Lucas, C., Leder-Luis, J., Gadarian, S. K., … Rand, D. G. (2014). Structural topic models for open-ended survey responses. American Journal of Political Science, 58(4), 1064–1082. http://doi.org/10.1111/ajps.12103 Scott, W. R. (2013). Institutions and Organizations: Ideas, Interests, and Identities (4th ed.). Sage publications. The Economist Intelligence Unit. (2016). Democracy Index 2015 Democracy in an age of anxiety. Retrieved from http://wiego.org/sites/wiego.org/files/publications/files/Chen_WIEGO_WP1.pdf%5 Cnhttp://www.worldbank.icebox.ingenta.com/content/wb/bk17952 Thornton, P., Ocasio, W., & Lounsbury, M. (2012). 3. Defining the Interinstitutional System. The Institutional Logics Perspective: A new Approach to Culture, Structure and Process (Vol. 15). http://doi.org/10.1093/acprof Truman, E. M. (2010). Sovereign wealth funds: Threat or salvation? Washington, DC. Wallach, H., Murray, I., Salakhutdinov, R., & Mimno, D. (2009). Evaluation Methods for Topic Models. International Conference on Machine Learning, (1), 1–3. http://doi.org/10.1145/1553374.1553515 Warren, G. (2014). Long-Term Investing: An Insitutional Investor Perspective. Wójcik, D. (2011a). 8. The Map of the Global Stock Market Redrawn: Stock Market Centres and their Future. In The Global Stock Market : Issuers, Investors, and Intermediaries in an Uneven World (pp. 1–19). http://doi.org/10.1093/acprof Wójcik, D. (2011b). Finance at the crossroads: Geographies of the financial crisis and its implications. Environment and Planning A, 43(8), 1756–1760. http://doi.org/10.1068/a44199 Yeung, H. W. (1998). Capital, state and space- contesting the borderless world. Transactions of the Institute of British Geographers, 23(3), 291–309.

31

APPENDIX A:

LIST OF SOVEREIGN INVESTORS KEPT FOR OUR ANALYSIS AND GROUPED BY

Publish annual report in English

PUBLICATION OF 2015 ANNUAL REPORT IN ENGLISH AND WEBSITE

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Sovereign Investor ADIA Alaska Permanent Fund Alberta Heritage Savings Trust Fund Alberta Investment Management Corp. APG Bahrain Mumtalakat Holding Company British Columbia Investment Management Corp. Caisse des depots et consignations CDP Equity (formerly fondo strategico italiano) CDPQ China Investment Corporation CPPIB Employees Provident Fund / KWSP Fonds de Reserve pour les Retraites Fundo Soberano de Angola Future Fund GIC Government Pension Investment Fund Heritage and Stabilization Fund

19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Hong Kong Monetary Authority Exchange Fund - Investment Portfolio and Long-term Growth Investment Corp. of Dubai Ireland Strategic Investment Fund JSC National Investment Corporation of National Bank of Kazakhstan JSC Samruk-Kazyna Khazanah Korea Investment Corporation Mubadala Development Co. National Fund of the Republic of Kazakhstan National Pension Service New Mexico State Investment Council New Zealand Superannuation Fund Nigeria Sovereign Investment Authority Norges Bank Investment Management North Dakota Legacy Fund Ontario Municipal Employees Retirement System Ontario Teachers' Pension Plan Palestine Investment Fund

32

Country UAE USA Canada Canada Netherlands Bahrain Canada France Italy Canada China Canada Malaysia France Angola Australia Singapore Japan Trinidad and Tobago China UAE Ireland Kazakhstan Kazakhstan Malaysia South Korea UAE Kazakhstan South Korea USA New Zealand Nigeria Norway USA Canada Canada Palestine

Publish a website No website, no annual report in English

38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64

Pension Reserve Fund and Economic and Social Stabilization Fund Petroleum Fund of Timor-Leste PGGM Public Investment Corp. QIC Russian Direct Investment Fund State Administration of Foreign Exchange State General Reserve Fund of the Sultanate of Oman State Oil Fund of the Republic of Azerbaijan Temasek Holding TIAA-CREF Western Australian Future Fund Abu Dhabi Investment Council Emirates Investment Authority Kuwait Investment Authority National Council for Social Security Fund National Wealth Fund Public Investment Fund Qatar Investment Authority State Capital Investment Corporation Brunei Investment Agency Budgetary Income Stabilization Fund Fonden Fondo de Ahorro de Panama Fondo de Estabilizacion Fiscal Fondo Mexicano del Petroleo para la Estabilizacion y el Desarollo Fonds Gabonais d'Investissements Strategiques & Fonds Souverain de la Republique Gabonaise

Chile

Fund for Future Generation

Equatorial Guinea Brazil

65 66 67 68 69 70 71 72 73 74 75 76

Fundo Soberano do Brazil & Fundo Fiscal de Investimento e Estabilizacao Future Generations Reserve Fund Government Investment Unit of Indonesia Hong Kong Future Fund Investment Fund for Macroeconomic Stabilization International Petroleum Investment Company Ithmar Capital / FMDT (Fonds Marocain de Developpement Touristique) Libyan Investment Authority Mongolia Fiscal Stability Fund National Development Fund of Iran Northwest Territories Heritage Fund

33

Timor-Leste Netherlands South Africa Australia Russia China Oman Azerbaijan Singapore USA Australia UAE UAE Kuwait China Russia Saudi Arabia Qatar Vietnam Brunei Mexico Venezuela Panama Peru Mexico Gabon

Bahrain Indonesia China Venezuela UAE Morocco Libya Mongolia Iran Canada

77 78 79 80 81 82 83

Oman Investment Fund Papua New Guinea Sovereign Wealth Fund Pula Fund Revenue Equalization Reserve Fund Revenue Regulation Fund Saudi Arabian Monetary Agency - Investment Portfolio Turkmenistan Stabilization Fund

34

Oman Papua New Guinea Botswana Kiribati Algeria Saudi Arabia Turkmenistan