An academic study of sovereign wealth funds shows that they behave differently from other institutional investors when investing in private equity.

The study, by Sofia Johan of York University in Canada, April Knill of Florida State University in the US, and Nathan Mauck of the University of Missouri in the US, examined the investments of 19 SWFs in 424 companies – both private and public – around the world between 1991 and 2010.

Similar to other institutional investors, the SWFs were less likely to invest in private equity, compared with listed companies, internationally. But unlike the others, they were more likely to invest in private equity, compared with public, in countries where investor protection was low and where bilateral political relations between the SWF and the target country were weak.

As previous researchers have also found, the study showed that political relations significantly influenced the probability that SWFs would invest in private equity, versus public equity.

Because of the differences, the academics suggest that the literature on institutional investors should not be used for policy making for SWF investment in private equity. Rather, policy would need to be based on individual SWF investments.