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| An Analysis of Sovereign Wealth Funds' Recent Venture in Developed Capital Markets | | final.jpg)
Surendranath Jory | final.JPG)
Mark Perry | final.jpg)
Thomas Hemphill | |
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| In 2007 and 2008, Sovereign Wealth Funds (SWFs), mostly from Asia and the Middle East, invested billions of dollars in the stocks of major US financial institutions, but prior to these investments, SWFs were relatively unknown in the US. Following major investments by SWFs in the US stock market, both investors and regulators are taking a closer look at them. The cause for concern is that many SWFs disclose very little about their corporate governance, organization structure, investment objectives, and short- and long-term targets, among other issues. These concerns led to fears by some that foreign governments might be using SWFs to acquire strategic assets in the U.S. for geopolitical gains. In this paper, we look at SWFs’ investment objectives, the benefits they bring to target firms, the rising public concern in the U.S. about SWFs, the governance structure of SWFs, their revenue sources and investment preferences, the performance of their U.S. investments, and their regulatory supervision. |
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| Crisis, Finance, and Private Equity: An Update | | 
Jamie Morgan | |
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| Since mid-2007 private equity finance activity has undergone significant changes. The nature of these changes is intimately related to the current banking crisis and the underlying causes of the ‘credit crunch’ based on the development of an ‘originate and distribute’ model of lending and based on securitisation. These changes significantly affected risk perceptions in the finance system, which in turn qualitatively changed the environment within which risk had been modelled and considered manageable. Private equity finance can thus be explored as both a contributing factor in the current crisis and then as a set of adaptive practices responding to it. This raises important issues regarding how regulators approach private equity finance from a broader context. |
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| Real Investment Options: Case Illustrations | | final.jpg)
Giampiero Favato | final.jpg)
Carole Print | |
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| Despite the apparent relevance of Real Options to business decisions, they have had limited impact generally, and one problem frequently expressed is that Options Theory is regarded as being notoriously arcane and many discussions that go beyond the conceptual level get trapped in the mathematics. This is unfortunate because Real Options are best understood as a way of thinking and need to be positioned correctly alongside an approach that creates coherent stories about possible future outcomes, which is the territory of scenario analysis.
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| The Rise and Rise of Operational Risk | | .jpg)
Imad Moosa | |
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| Operational risk arises from the possibility of losses resulting from the failure of people, processes, and systems and from external factors. Although it has been around since the creation of the Planet, operational risk has recently attracted the attention of regulators as well as the financial institutions exposed to it. The changing nature of banking and the introduction of automation on a wide scale has led to a rise in the significance of operational risk. This is why the Basel II Accord, unlike Basel I, has a lot of provisions for operational risk, which is treated separately from credit risk and market risk. The conclusion is that operational risk is here to stay and that the sophistication of the advanced measurement approach of Basel II is rather inconsequential as far as operational risk management is concerned. |
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| Carbon Emissions Trading: Managing Climate Change Through Financial Markets | | final.jpg)
Jonatan Pinkse | |
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| Carbon emissions trading is a policy instrument that regulates corporate environmental impact by putting a price on carbon, thus creating a new financial market. This paper questions the effectiveness of managing climate change in this way as it suffers from several drawbacks. Trading rules have been changing constantly as governments have interpreted them differently over time and companies – mostly heavy emitters – have been involved in the politics of how to design emissions trading schemes. As a consequence the actual constraint that emissions trading puts on carbon has been watered down considerably. However, the paper also argues that these drawbacks may be overcome when the emission market becomes more mature and points out several ways how emissions trading schemes can become more effective in reducing emissions and spurring innovation. |
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6 January 2009 |
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