Quiet SWFs no good for companies
Companies do badly after foreign sovereign wealth funds buy their shares, according to new research* that points to the funds’ hands-off approach as the source of the problem.
When an SWF invests, the target company’s share price often jumps in the days surrounding the investment, the research found, but over the following year or two, the share price significantly underperforms its peer group.
“It’s not that they’re poor stock-pickers,” said Professor William Megginson of Oklahoma University. “It’s less what they do than what they don’t do.
* Sovereign Wealth Fund Investment Patterns and Performance, by Bernardo Bortolotti, Veljko Fotak, William Megginson, William Miracky