A sovereign wealth fund (SWF), sovereign investment fund, or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds. Sovereign wealth funds invest globally. Most SWFs are funded by revenues from commodity exports or from foreign-exchange reserves held by the central bank. By historic convention, the United States' Social Security Trust Fund, with US$2.8 trillion of assets in 2014, and similar vehicles like Japan Post Bank's JP¥200 trillion of holdings, are not considered sovereign wealth funds.

Some sovereign wealth funds may be held by a central bank, which accumulates the funds in the course of its management of a nation's banking system; this type of fund is usually of major economic and fiscal importance. Other sovereign wealth funds are simply the state savings that are invested by various entities for the purposes of investment return, and that may not have a significant role in fiscal management.

The accumulated funds may have their origin in, or may represent, foreign currency deposits, gold, special drawing rights (SDRs) and International Monetary Fund (IMF) reserve positions held by central banks and monetary authorities, along with other national assets such as pension investments, oil funds, or other industrial and financial holdings. These are assets of the sovereign nations that are typically held in domestic and different reserve currencies (such as the dollar, euro, pound, and yen). Such investment management entities may be set up as official investment companies, state pension funds, or sovereign funds, among others.

There have been attempts to distinguish funds held by sovereign entities from foreign-exchange reserves held by central banks. Sovereign wealth funds can be characterized as maximizing long-term return, with foreign exchange reserves serving short-term "currency stabilization", and liquidity management. Many central banks in recent years possess reserves massively in excess of needs for liquidity or foreign exchange management. Moreover, it is widely believed most have diversified hugely into assets other than short-term, highly liquid monetary ones, though almost no data is publicly available to back up this assertion.


The term "sovereign wealth fund" was first used in 2005 by Andrew Rozanov in an article entitled, "Who holds the wealth of nations?" in the Central Banking Journal.[1] The previous edition of the journal described the shift from traditional reserve management to sovereign wealth management; subsequently the term gained widespread use as the spending power of global officialdom has rocketed upward.

Some of them have grabbed attention making bad investments in several Wall Street financial firms such as Citigroup, Morgan Stanley, and Merrill Lynch. These firms needed a cash infusion due to losses resulting from mismanagement and the subprime mortgage crisis.

SWFs invest in a variety of asset classes such as stocks, bonds, real estate, private equity and hedge funds. Many sovereign funds are directly investing in institutional real estate. According to the Sovereign Wealth Fund Institute's transaction database around US$9.26 billion in direct sovereign wealth fund transactions were recorded in institutional real estate for the last half of 2012.[2] In the first half of 2014, global sovereign wealth fund direct deals amounted to $50.02 billion according to the SWFI.[3]

Early SWFs

Sovereign wealth funds have existed for more than a century, but since 2000, the number of sovereign wealth funds has increased dramatically. The first SWFs were non-federal U.S. state funds established in the mid-19th century to fund specific public services.[4] The U.S. state of Texas was thus the first to establish such a scheme, to fund public education. The Permanent School Fund (PSF) was created in 1854 to benefit primary and secondary schools, with the Permanent University Fund (PUF) following in 1876 to benefit universities. The PUF was endowed with public lands, the ownership of which the state retained by terms of the 1845 annexation treaty between the Republic of Texas and the United States. While the PSF was first funded by an appropriation from the state legislature, it also received public lands at the same time that the PUF was created. The first SWF established for a sovereign state is the Kuwait Investment Authority, a commodity SWF created in 1953 from oil revenues before Kuwait gained independence from the United Kingdom. According to many estimates, Kuwait's fund is now worth approximately US$600 billion.

Another early registered SWFs is the Revenue Equalization Reserve Fund of Kiribati. Created in 1956, when the British administration of the Gilbert Islands in Micronesia put a levy on the export of phosphates used in fertilizer, the fund has since then grown to $520 million.[5]

Nature and purpose

SWFs are typically created when governments have budgetary surpluses and have little or no international debt. It is not always possible or desirable to hold this excess liquidity as money or to channel it into immediate consumption. This is especially the case when a nation depends on raw material exports like oil, copper or diamonds. In such countries, the main reason for creating a SWF is because of the properties of resource revenue: high volatility of resource prices, unpredictability of extraction, and exhaustibility of resources.

There are two types of funds: saving funds and stabilization funds. Stabilization SWFs are created to reduce the volatility of government revenues, to counter the boom-bust cycles' adverse effect on government spending and the national economy. Savings SWFs build up savings for future generations. One such fund is the Government Pension Fund of Norway. It is believed that SWFs in resource-rich countries can help avoid resource curse, but the literature on this question is controversial. Governments may be able to spend the money immediately, but risk causing the economy to overheat, e.g., in Hugo Chávez's Venezuela or Shah-era Iran. In such circumstances, saving the money to spend during a period of low inflation is often desirable.

Other reasons for creating SWFs may be economic, or strategic, such as war chests for uncertain times. For example, the Kuwait Investment Authority during the Gulf War managed excess reserves above the level needed for currency reserves (although many central banks do that now). The Government of Singapore Investment Corporation and Temasek Holdings are partially the expression of a desire to bolster Singapore's standing as an international financial centre. The Korea Investment Corporation has since been similarly managed. Sovereign wealth funds invest in all types of companies and assets, including startups like Xiaomi and renewable energy companies like Bloom Energy.[6]

According to a 2014 study, SWFs are not created for reasons related to reserve accumulation and commodity-export specialization. Rather, the diffusion of SWF can best understood as a fad whereby certain governments consider it fashionable to create SWFs and are influenced by what their peers are doing.[7]

Concerns about SWFs

The growth of sovereign wealth funds is attracting close attention because:

The governments of SWF's commit to follow certain rules:

Governmental interest in 2008

Santiago Principles

Further information: Santiago Principles

There were a number of transparency indices springing out before the Santiago Principles, some more stringent than others.[citation needed] To address these concerns some of the world's main SWFs come together in a summit in Santiago, Chile on 2–3 September 2008, under the leadership of the IMF, they formed a temporary International Working Group of Sovereign Wealth Funds. This working group then drafted the 24 Santiago Principles, to set out a common global set of international standards regarding transparency, independence, and accountability in the way that SWFs operate.[13][14] These were published after being presented to the IMF International Monetary Financial Committee on 11 October 2008.[14] They also considered a standing committee to represent them and so a new organisation, the International Forum of Sovereign Wealth Funds (IFSWF) was then set up to maintain the new standards going forward and represent them in international policy debates.[15]

As of 2016, 30[16] funds have formally signed up to the Principles representing collectively 80% of assets managed by sovereign funds globally or US$5.5 trillion.[17]

New SWFs established in developed jurisdictions since 2010

New SWFs were established in various developed jurisdictions after 2010 following the rise in energy and commodity prices, e.g., the North Dakota Legacy Fund (2011) and the Western Australian Future Fund (2012). The Israeli Citizens' Fund should start operating in 2020[needs update] after several years of preparatory work involving veteran American as well as local asset management experts.[18]

Size of SWFs

Assets under management of SWFs amounted to $7.94 trillion as at December 24, 2020.[19]

Countries with SWFs funded by oil and gas exports, totaled $5.4 trillion as of 2020.[20] Non-commodity SWFs are typically funded by transfer of assets from official foreign exchange reserves, and in some cases from Government budget surpluses and privatization revenues. Middle Eastern and Asian countries account for 77% of all SWFs.

Largest sovereign wealth funds

See also: List of countries by sovereign wealth funds and List of countries by foreign-exchange reserves

Country or Region Abbreviation Fund Assets,
billions USD[21]
Inception Origin
Norway Norway GPF-G Government Pension Fund 1,370[22] 1990 Oil & Gas
China China CIC China Investment Corporation 1,200[23] 2007 Non-commodity
Norway Norway OVF The Norwegian Church Endowment 1.0[24] 1821 Land & Property
Kuwait Kuwait KIA Kuwait Investment Authority 737.9[25] 1953 Oil & Gas
United Arab Emirates United Arab Emirates
ADIA Abu Dhabi Investment Authority 649[26] 1967 Oil & Gas
Saudi Arabia Saudi Arabia SAMA SAMA Foreign Holdings 708 1952 Oil & Gas
Hong Kong Hong Kong HKMA Exchange Fund (Hong Kong) 586[27] 1935[27] Non-commodity
China China SAFE SAFE Investment Company 743 1997 Non-commodity
Singapore Singapore GIC GIC Private Limited 545[23] 1981 Non-commodity
Qatar Qatar QIA Qatar Investment Authority 295.2[28] 2005 Oil & Gas
United Arab Emirates United Arab Emirates
ICD Investment Corporation of Dubai 302[23] 2006 Oil & Gas
Singapore Singapore TH Temasek Holdings 484[29] 1974 Non-commodity
Saudi Arabia Saudi Arabia PIF Public Investment Fund 430[23] 1971 Oil & Gas
France France CDC Caisse des Dépôts et Consignations 202[30] 1816 Non-commodity
Russia Russia NWF Russian National Wealth Fund 191 2008 Oil & Gas
Malaysia Malaysia KN Khazanah Nasional 33 1993 Non-commodity
United Arab Emirates United Arab Emirates
MIC Mubadala Investment Company 232 1984 Oil & Gas
South Korea South Korea KIC Korea Investment Corporation 201[31] 2005 Non-commodity
Australia Australia FF Future Fund[32] 144[33] 2006 Non-commodity
Kuwait Kuwait PIFSS Public Institution For Social Security Fund[34][35] 133.7 1955 Non-commodity
Iran Iran NDFI National Development Fund 24[36] 2011 Oil & Gas
France France BPI Bpifrance 33 2008 Non-commodity
Libya Libya LIA Libyan Investment Authority 67 2006 Oil & Gas
Kazakhstan Kazakhstan NF Kazakhstan National Fund 58 2012 Oil & Gas
Kazakhstan Kazakhstan SK Samruk-Kazyna 62 2008 Oil & Gas
United States United States of America
APFC Alaska Permanent Fund[37] 67.3 1976 Oil & Gas
Brunei Brunei BIA Brunei Investment Agency 45 1983 Oil & Gas
United States United States of America
PSF Permanent School Fund 48 1854 Land & Mineral Royalties
United Arab Emirates United Arab Emirates
EIA Emirates Investment Authority 63 2007 Oil & Gas
United States United States of America
PUF Permanent University Fund 25.2[38] 1876 Land & Mineral Royalties
Azerbaijan Azerbaijan SOFAZ State Oil Fund of the Republic of Azerbaijan[39] 43 1999 Oil & Gas
Russia Russia RDIF Russian Direct Investment Fund 40 2011 Non-commodity
Norway Norway GPF-N Government Pension Fund – Norway 22 2006 Oil & Gas
Austria Austria ÖBAG Österreichische Beteiligungs AG 31.6[40] 1967 Non-commodity
Turkey Turkey TWF Turkey Wealth Fund 34 2017 Non-commodity
Oman Oman OIA Oman Investment Fund 31 1980 Oil & Gas
New Zealand New Zealand NZSF New Zealand Superannuation Fund 27 2003 Non-commodity
United States United States of America
NMSIC New Mexico State Investment Council[41] 26 1958 Oil & Gas
East Timor Timor Leste TLPF Timor-Leste Petroleum Fund 18 2005 Oil & Gas
Chile Chile ESSF Economic and Social Stabilization Fund[42] 11 2007 Copper
Canada Canada
AHSTF Alberta Heritage Savings Trust Fund[43] 12 1976 Oil & Gas
Bahrain Bahrain BMHC Mumtalakat Holding Company 19 2006 Oil & Gas
Chile Chile PRF Pension Reserve Fund 11 2006 Copper
Republic of Ireland Ireland ISIF Ireland Strategic Investment Fund[44] 12 2014 Non-commodity
Peru Peru FSF Fiscal Stabilization Fund[45] 5 1999 Non-commodity
Italy Italy CDP Equity Cassa Depositi e Prestiti Equity[46] 5 2011 Non-commodity
United States United States of America
PWMTF Permanent Wyoming Mineral Trust Fund 23 1974 Minerals
Botswana Botswana PF Pula Fund 4[47] 1994 Diamonds
Trinidad and Tobago Trinidad & Tobago HSF Heritage and Stabilization Fund[48] 6 2000 Oil & Gas
China China CADF China-Africa Development Fund 10 2007 Non-commodity
Angola Angola FSDEA Fundo Soberano de Angola 5 2012 Oil & Gas
United States United States of America
NDLF North Dakota Legacy Fund 8.1 2011 Oil & Gas
Indonesia Indonesia INA Indonesia Investment Authority 5.3 2021 Non-commodity
India India NIIF National Investment and Infrastructure Fund 4 2015 Non-commodity
Colombia Colombia FAEP Fondo de Ahorro y Estabilización Petrolera 12 1995 Oil & Gas
United States United States of America
ATF Alabama Trust Fund 3 1985 Oil & Gas
United States United States of America
SIFTO Utah-SITFO[49] 2.5 1983 Land & Mineral Royalties
United States United States of America
IEFIB Idaho Endowment Fund Investment Board[50] 2 1969 Land & Mineral Royalties
Nigeria Nigeria
BDIC Bayelsa Development and Investment Corporation 0.1 2012 Non-commodity
Nigeria Nigeria NSIA Nigeria Sovereign Investment Authority 2.6[51] 2011 Oil & Gas
Kuwait Kuwait AWQAF Awqaf and Islamic Affairs Fund[52] 1.99 1993 Non-commodity
United States United States of America
LEQTF Louisiana Education Quality Trust Fund[53] 1.4 1986 Oil & Gas
Panama Panama FAP Fondo de Ahorro de Panama[54] 1.4 2012 Non-commodity
United Arab Emirates United Arab Emirates
RIA RAKIA 2 2005 Oil & Gas
Bolivia Bolivia FINPRO Fondo para la Revolución Industrial Productiva[55] 0.4 2015 Non-commodity
United States United States of America
CSF Oregon Common School Fund 2 1859 Lands & Mineral Royalties
Senegal Senegal FONSIS Fonds Souverain d'Investissement Strategiques[56] 0.1 2012 Non-commodity
State of Palestine Palestine PIF Palestine Investment Fund 1.0 2003 Non-commodity
Kiribati Kiribati RERF Revenue Equalization Reserve Fund 0.4 1956 Phosphates
Vietnam Vietnam SCIC State Capital Investment Corporation 1.2 2006 Non-commodity
Ghana Ghana GPF Ghana Petroleum Funds 0.9 2011 Oil & Gas
Gabon Gabon FGIS Fonds Gabonais d'Investissements Strategiques 1.0 2012 Oil & Gas
Mauritania Mauritania NFHR National Fund for Hydrocarbon Reserves 0.1 2006 Oil & Gas
Australia Australia
WAFF Western Australian Future Fund 0.8 2012 Minerals
Mongolia Mongolia FHF Future Heritage Fund[57] 0.1 2011 Minerals
Equatorial Guinea Equatorial Guinea FRGF Fonds de Réserves pour Générations Futures 0.2 2002 Oil & Gas
Papua New Guinea Papua New Guinea PNGSWF Papua New Guinea Sovereign Wealth Fund 22 2011 Oil & Gas
Turkmenistan Turkmenistan TSF Turkmenistan Stabilization Fund 0.5 2008 Oil & Gas
United States United States of America
WVFF West Virginia Future Fund 19 1997 Oil & Gas
Mexico Mexico FMP Fondo Mexicano del Petroleo para la Estabilizacion y el Desarrollo 7 2000 Oil & Gas
United States United States of America FMP Colorado Public School Fund Endowment Board 1.2 2016 Lands and Minerals Royalties
United Arab Emirates United Arab Emirates
SAM Sharjah Asset Management Holding[58][59] 2 2008 Non-Commodity
Rwanda Rwanda AGDF Agaciro Development Fund[60] 0.2 2012 Non-commodity

See also


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Further reading