US tax implications for sovereign wealth funds of financial derivative investments (PricewaterhouseCoopers)

December 2010

KEYWORDS: controlled commercial entity, derivative, Section 892 Exemption, Short Selling, Sovereign Wealth Funds, SWFs, tax, United States

Authors:

Philip Sutton, John Mattos, Rebecca Lee, Robert Saltzman

Organizations:
  • PricewaterhouseCoopers

Summary:

SWFs have begun hedging the foreign currency and interest rate exposures on their investments with financial derivatives. Further, SWFs have also begun to utilize financial derivatives to achieve the fundamental economic exposure that their fund managers may be seeking. SWFs are key investors in many onshore and offshore fund complexes. Fund managers for these fund complexes also have expanded their investment parameters in similar ways to achieve the returns they are seeking.

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