Miles Kimball, David A. Levine, Robert Waldmann and Noah Smith on the Design of a US Sovereign Wealth Fund
New post: "Miles's First TV Interview: A US Sovereign Wealth Fund" blog.supplysideliberal.com/post/409188374… (On CNBC's Squawkbox.)- @davealevine Because, it is a lot like running, say, Harvard's endowment. Many people are highly experienced. Independence is essential.
@mileskimball Harvard does well but even they struggle with the constraints of politics. That and size makes me think it would be hard.- @mileskimball don't get me wrong - I love the concept, I just struggle with the feasibility.
- @davealevine What do you think is the best way to improve the chances it would be done well?
- @davealevine I have been thinking US SWF has to have independence at the same level as the Fed. Board appointed for long terms.
- @davealevine But of course, the board could hire and fire the actual financial managers at will.
- @davealevine My default would be to copy the Fed terms of office: 14 years for the board, 4 years for the Chair asynchronous from POTUS term
- @davealevine Dual mandate: (1) maximize rate of return for a given risk level AND (2) foster financial stability.
- @davealevine An explicit statement in the law that part of fulfilling the mandate to foster financial stability is a contrarian strategy.
- @mileskimball i don't think that is good enough. I think you need to have amazing investors. That means private market incentives.
- @mileskimball i think the only way to do it right is to align incentives of fund managers with performance. Harvard figured this out well.
- @davealevine Yes, there has to be a lot of leeway in the compensation for the portfolio managers.
- @davealevine But the board is more like the trustees or regents of a university. They don't need huge pay. Only the portfolio managers do.
- @mileskimball the theory sounds like it might work but I don't think it is politically feasible because people will likely demonize success
- @davealevine Part of the purpose I see for US SWF is to take the political heat off the Fed. US SWF is a political lightning rod.
- @davealevine It is absolutely inevitable that the US SWF would receive an enormous amount of criticism. I think that is OK.
- @davealevine When I said the US SWF would be a reservoir of expertise for financial stability, I was thinking of ptf managers' high pay.
- @mileskimball I'm supportive and have thought the same thing. But I think a more practical approach is to broaden access to skill.
- @davealevine What do you mean by broaden access to skill? Few people will ever have *that* level of skill.
- @davealevine Yes. The US SWF should provide a low-fee mutual fund available to anyone that tracks what they do.
- Miles Kimball and David Levine on the Design of a US Sovereign Wealth Fund sfy.co/dCy9 #storify
