Policy Brief: Design Choices in Sovereign Asset Management Companies

Abstract

After a large economic shock, states often transfer a portion of privately held debt to the public balance sheet. The mechanism used for this transfer differs, depending on the nature and cause of the shock—mobilization expenditures, after war breaks out; relief spending, after storms or other disasters strike; transfer payments, after financial stress. This policy brief reviews one structure used to achieve these public-private debt transfers, the sovereign asset management company (AMC). It offers a new way to distinguish sovereign AMCs along four design pillars: priority, autonomy, authority, and patience. Based on those pillars, it separates sovereign AMCs into four archetypes. Finally, in a summary matrix, it compares 14 sovereign AMCs across a broader set of design choices.

The views expressed in this article are the author’s alone and do not necessarily reflect the views of the Federal Reserve Board or the United States government.