Sovereign wealth funds targets selection: A comparison with pension funds

This paper investigates the determinants of sovereign wealth funds' (SWFs) decisions to invest in publicly traded firms in comparison to pension funds. Using a sample of 344 firms targeted by SWFs over the 1991-2011 period and a control sample of 663 firms targeted by pension funds, we find that SWFs, in comparison to pension funds, are more likely to invest in firms operating in strategic industries as defined by Fama and French (1997) (financial sector, natural resources, mining, transportation, telecommunication and utilities) and in countries with sustainable economic growth and weak legal and institutional environment. Our findings are robust to disproportional size of some SWFs, their financing sources, their transparency level and acquisition activities during the recent financial crisis.