Investment Strategies of Sovereign Wealth Funds

Question: Discuss about the Investment Strategies of Sovereign Wealth Funds. Answer: Introduction: The assignment mainly depicts relevant investment objective and constraints, which encircles the any investment decision conducted by the investor. In addition, the investors mainly target the relevant investment objective like safety, income, liquidity, and tax minimisation. However, the investment constraints level like risk tolerance, financial capability, moral and understanding of realistic or unrealistic situations. The investment constraint mainly depicts incapability of the investors to make adequate investments. Investment objectives: The primary objective of investment mainly consists of income, growth in capital and safety of principles. The investor mainly conducts trade based on return, which could be generated from the overall investment. Moreover, fulfilment of the primary objective is essential for the investor as it mainly helps in improving its overall profitability. The investor mainly opts for investment opportunity, which provide a higher income and raises the overall capital growth. Bernstein, Lerner Schoar (2013) mentioned that investors mainly use technical and fundamental analysis to identify relevant opportunities, which could help in improving the investment capital. The investment objective like safety of capital is the main factor, which is required by the investors before initiating a trade. The secondary objective that is mainly needed by the investor is liquidity and tax minimisation, which is needed by the investor while conducting relevant investment. The secondary objective mainly states that investors are only interested on stock, which has higher liquidity, as it could be freely traded in the market. This objective is mainly essential for the investor to make adequate investment decision and change its position according to change in trend of the stock. Moreover, the investors mainly use investment option like bond and mutual funds, which help in minimising the tax and maximising its overall retention rate (Wagner, 2013). Investment constraints: There are relative six segment, which could be identified as the investment constraints and reduce interest of the investors to continue with its investment. The level of income and wealth could be identified as the most viable option, which is analysed by the investor while maintaining or conducting investments (Liu, 2015). In addition, the constraints of minimum income and risk tolerance of investors mainly reduce viability of the investors to conduct risky trades for increasing their return from investment. Moreover, the change in emotional investment and realism of actual trade also plays a vital role in barding the investors to conduct relevant trades. Cao, Han Wang (2015) mentioned that rising investment constraints mainly reduce liquidity in the market and increases risk of investment for short term investors. Conclusion: The overall assignment mainly evaluate the objectives and constraints, which is been evaluated by investors to improve their return on investment. Moreover, objectives of the investment mainly play a vital role, where investors are able to identify the specified investment opportunity. These identified objectives also act as a constraint, which reduces investment in certain stock with low return and higher risk. Furthermore, the constraints identified in the assessment mainly acts as the alarming signal for investors, where they could come out from their investment due to rising risk or reducing return. Reference: Bernstein, S., Lerner, J., Schoar, A. (2013). The investment strategies of sovereign wealth funds.The Journal of Economic Perspectives,27(2), 219-238. (https://dspace.mit.edu/openaccess-disseminate/1721.1/99146) Cao, J., Han, B., Wang, Q. (2015). Institutional investment constraints and stock prices. (https://www-2.rotman.utoronto.ca/facbios/file/JFQA_Han.pdf) Liu, W. L. (2015). Investment Constraints and Delegated Portfolio Management. (https://sfm.finance.nsysu.edu.tw/php/Papers/CompletePaper/075-579615281.pdf) Wagner, D. (2013). Sovereign Wealth Funds: Investment Objectives and Asset Allocation Strategies.Browser Download This Paper. (https://asia-first.s3.amazonaws.com/researches/web_link/a3cdbc64bd38c109fc550b7a638d718b.pdf)