Abstract

Sovereign Wealth Funds (SWFs) have existed for a long time but the attention to these funds has started in recent years and it has continued to grow among scholars and informed observers. They represent a new and important category of state-owned investment vehicles and their behaviours still leave many questions open. This article focuses on the governance gap due to the passive nature of SWFs. In detail, we note that, unlike other large institutional investors, SWFs are mindful of the fact that any active investment might generate additional political reaction and lead to a regulatory backlash from target-country governments. As a matter of fact, to minimize opposition, SWFs often commit to not exercising their rights and seem to create a governance gap.