I guess it should come as no surprise. There’s lots of data that shows retail investors and institutional investors make, in aggregate, lousy investing decisions. They buy near the top, they sell near the bottom, they hire hot managers that soon become cold, and fire cold managers that soon become hot. But sovereign wealth funds are in a unique position to be able to buy and hold long-term assets—or at least you would think so.
It turns out, according to a Reuters article, that they have the same problems as everybody else, even according to them.
“We’re not different from any other asset managers. The notion of being a long term investor does not mean you discard the main rationale for any investment. There is tremendous pressure on an institution like us (to make profit), because we belong to our people,” Israfil Mammadov, chief investment officer at Azerbaijan’s sovereign fund, told Reuters.
In fact, it might even be worse. Imagine if an investment manager had Congress breathing down their neck! Can you imagine the grillings before the committee? But that’s what can happen in a sovereign wealth environment:
“In practice, the notion that SWFs are more patient than private investors does not really hold water. SWFs often face the same horizon as other market players, and are subject to the same exigencies — they need to maximise return for their shareholders,” an advisor to an Asian SWF told Reuters.
“And governments can be even less patient than private investors. SWFs pursue industrial goals of the government that can be quite pressing. They are operating under very tight schedules.”
Individuals that purse a flexible, well-thought-out systematic investment process are just as likely to do well as any institution or sovereign wealth fund. Don’t underestimate how much factors like patience and unemotional decision-making can help your investment results.
