Sovereign Wealth Funds and International Regulation

This chapter discusses the rise of Sovereign Wealth Funds (SWFs) as an example of the wider phenomenon of overseas state investment. It sets out the striking expansion in the number and financial size of SWFs, most of which are located in the Middle East and Asia, and then summarizes the lively debates about whether SWF investments are a threat to the West and how they should be regulated at the international level. It then considers the international legal and normative framework that has been created to regulate SWFs, as well as the key relevant elements of the EU’s policies and legal regulation. It concludes that there is little evidence that a binding international regulatory framework that strongly constrains the choices of recipient countries through law or norms has been established. Thus, much scope for national choices about policies towards SWF equity investments remains.

Relationship Between Selected Macroeconomic Variables and the Financial Performance of Investment Banks in Kenya

Currently, investment banks in Kenya are facing a lot of challenges due to persistence losses. However, the available studies are inadequate to aid investment banks in overcoming these challenges in Kenya due to mixed findings, resulting in rising uncertainty on equity investments’ performance, leading to massive losses among investment banks.  This study, therefore, sought to model the relationship between inflation, GDP, interest rates, exchange rates, and financial performance of investment banks. Arbitrage pricing theory, Modern portfolio theory as well as classical economic theory (flow-oriented model) was used. A causal research design was adopted. The study found that inflation has negative significant influence on financial performance of equity investments among investment banks in Kenya. Also, GDP has positive and significant influence on financial performance of equity investments among investment banks in Kenya. Interest rate was also found to have negative and significant influence on financial performance of equity investments among investment banks in Kenya. In addition, exchange rate has negative significant influence on financial performance of equity investments among investment banks in Kenya. The study therefore recommends any investor including financial investors to methodically analyze inflation trends and understand how it affects the company’s financial performance. Investors must also be in a position to predict the future concerning inflation changes.

Relationship Between Selected Macroeconomic Variables and the Financial Performance of Investment Banks in Kenya

Currently, investment banks in Kenya are facing a lot of challenges due to persistence losses. However, the available studies are inadequate to aid investment banks in overcoming these challenges in Kenya due to mixed findings, resulting in rising uncertainty on equity investments’ performance, leading to massive losses among investment banks.  This study, therefore, sought to model the relationship between inflation, GDP, interest rates, exchange rates, and financial performance of investment banks. Arbitrage pricing theory, Modern portfolio theory as well as classical economic theory (flow-oriented model) was used. A causal research design was adopted. The study found that inflation has negative significant influence on financial performance of equity investments among investment banks in Kenya. Also, GDP has positive and significant influence on financial performance of equity investments among investment banks in Kenya. Interest rate was also found to have negative and significant influence on financial performance of equity investments among investment banks in Kenya. In addition, exchange rate has negative significant influence on financial performance of equity investments among investment banks in Kenya. The study therefore recommends any investor including financial investors to methodically analyze inflation trends and understand how it affects the company’s financial performance. Investors must also be in a position to predict the future concerning inflation changes.

Equity Investments, Bond Investments and Financial Performance of Collective Investment Schemes in Kenya

The collective investment schemes in Kenya have witnessed increased volatility in their earnings, resulting in irregular growth in the industry. This necessitates the need to understand the factors contributing to poor financial returns from collective investment schemes. Hence this study sought to investigate the effect of equity investments and bond investments on Kenyan CIS’s performance. The specific objectives were: To assess the effect of equity investments, bond investments on financial performance of collective investment schemes in Kenya. The study was anchored on: modern portfolio theory and the efficient market hypothesis. The positivism philosophy was applied, with the firms adopting an explanatory research design. The target population was 17 Collective Investment Schemes registered by the Capital Markets Authority and were operational in the period 2010 to 2018. Secondary data was sought from the Capital Markets Authority Annual reports and from the respective websites of the CIS’. Data was analyzed using descriptive statistics, correlational analysis and panel regression analysis. Hypotheses were tested at a significance level of 0.05. Findings indicate that equity investment, bond investments have an insignificant effect on CIS’ return on assets. Further, equity investments had a positive and significant effect on liquidity whereas bond investments had an insignificant effect on liquidity. The study recommends that CISs actively revise their equity investments and bond investments to stimulate financial returns.

Why the Operating Performance of Post-IPO Firms Decreases: Evidence from China

Based on a database of 200 listed firms from the Growth Enterprise Market of China, this paper employs regression models to investigate the significance of IPO capital expenditure to firms’ operating performance. It suggests that a vast majority of pre-IPO money is spent on business development to promote operating performance in order to meet IPO requirements. After the IPO, most of the money is transferred to equity investments in order to increase the firms’ market value quickly, which leads to operating performance decline and deterioration.

On being Sharīʿah compliant in equity investments: impact of investment horizon andmarket volatility

Purpose This paper aims to undertake a comprehensive comparative analysis of Sharīʿah-compliant equity investments (SCEIs) and their non-Sharīʿah counterparts, in India, conditioning for investment horizon and market volatility. Indirectly, it also investigates for time varying performance of SCEIs, and explicitly analyses the unsystematic risk and related adequacy of returns. Design/methodology/approach Testing for statistical significance of differences in risks and returns; analysing portfolio performance using conventional metrics, information ratio, and Jensen's Alpha; Estimating returns due to stock selection and market timing using Fama’s Net Selectivity and Treynor and Mazuy’s Models. Findings SCEIs in India do not significantly differ in their total risks and returns compared to their conventional counterparts. While their risk is lower in the monthly and quarterly investment horizons, their Jensen’s Alphas are positive only in the annual investment horizons. These findings hold, when market volatility is low. Market timing wipes out the superior returns that exist due to stock selection in SCEIs. Research limitations/implications Being Sharīʿah-compliant is beneficial only in longer investment horizons. Asset selection, not co-movement with the market, is key to excess returns to compensate for risks due to inadequate diversification. However, only cautious market timing can conserve them. Practical implications Though investors are not better-off in choosing ethical investments, they are not worse-off either. Being Sharīʿah-compliant is rewarding during less volatile markets. Originality/value This paper extends international literature on SCEIs, with evidence on the impact of investment horizon and market volatility on their returns and risks. Further, this paper is also a comprehensive analysis of Indian SCEIs, broadening the empirical evidence on a significant, non-Islamic and emerging market.

Institutional Investors and Infrastructure Investing

Institutional investors expect infrastructure to deliver long-term stable returns but gain exposure to infrastructure predominantly through finite-horizon closed private funds. The cash flows delivered by infrastructure funds display similar volatility and cyclicality as other private equity investments, and their performance similarly depends on quick deal exits. Despite weak risk-adjusted performance and failure to match the supposed characteristics of infrastructure assets, closed funds have received more commitments over time, particularly from public investors. Public institutional investors perform worse than private institutional investors. ESG preferences and regulations explain 25%–40% of their increased allocation to infrastructure and 30% of their underperformance.