SWFs, Hedge Funds, and the Reach of Transnational Governance

by Patrick Schena and Mohammed Naqvi

Though sometimes compared, sovereign wealth funds (“SWFs”) and hedge funds share little common operating ground, but considerable parallel and intersecting interests. They generally differ extensively with respect to stakeholders, mandates, asset allocation, risk profile, and scale. Where the former are public entities investing public assets, the latter invest for the benefit of qualified clients – including in fact SWFs – and so are accountable directly them. Such distinctions notwithstanding, the activities of SWFs and hedge funds are frequently linked and scrutinized both due to the nested relationship that sometimes exists between them and also for the challenges posed to observing – and certainly too regulating – the investment behavior of both. This short note is a preliminary investigation into the evolution of the bespoke governance frameworks that have emerged to narrow this perceived regulatory gap.

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