Sovereign Wealth Fund Institute - SWFI (2024)

FAQs

Who is the owner of sovereign wealth fund? ›

A sovereign wealth fund is owned by the general government, which includes both central government and sub-national governments. Includes investments in foreign financial assets. They invest for financial objectives.

A sovereign wealth fund is a state-owned investment fund comprised of money generated by the government, often derived from a country's surplus reserves. SWFs provide a benefit for a country's economy and its citizens.

The world's largest sovereign wealth fund (SWF) as of December 2022 was China Investment Corporation (CIC), managing assets reaching around 1.35 trillion U.S. dollars. The CIC is used to manage a portion of China's foreign currency reserves and established in 2007.

Some countries may have more than one SWF. Also, while the United States does not have a federal sovereign wealth fund, several of its states have their own SWFs. The list does not include pension funds that do not meet the SWF criteria.

Government ownership: SWFs are typically owned and operated by governments or government entities. They are established by countries to manage and invest excess foreign exchange reserves, which often originate from commodities, trade surpluses, or other revenue sources.

Despite the advantages, SWFs are not without their drawbacks. One concern is the potential for mismanagement and corruption. Poor governance and lack of transparency can lead to funds being misappropriated or invested in risky ventures, resulting in significant financial losses.

SWFs generally enjoy favorable tax treatment in the U.S., but this treatment is subject to specific limitations; SWFs typically require separate LPA provisions or side-letter protection to ensure that their favorable tax treatment is not thwarted by the activities of the funds in which they invest. US Tax Exemption.

A recent report from Brand Finance — a London-based independent brand valuation consultancy — named Saudi Arabia's Public Investment Fund as the world's most valuable sovereign wealth fund brand. The report also ranked the US multinational BlackRock as the world's most valuable asset management brand.

Currently, more than 20 countries have these funds, and half a dozen more have expressed an interest in establishing one. Still, the holdings remain quite concentrated, with the top five funds accounting for about 70 percent of total assets.

The top three largest asset owners have remained the same since 2017, with The Government Pension Investment Fund (GPIF) of Japan continuing to dominate with US$1.6 trillion of AUM. 1New sources of information were used for some countries in 2019. GPIF remained the largest asset owner in the world.

What is an example of a sovereign wealth fund? ›

China's first sovereign fund was Central Huijin, which it established in 2003. China's sovereign wealth funds entered global markets in 2007, with the establishment of China Investment Corporation (CIC). Since then, the scale and scope of China's sovereign funds have expanded significantly.

SWF money can come from a few different places, including government payments; trade surpluses; exports of natural resources; foreign currency operations; or privatizations funds. SWFs tend to have a higher risk tolerance because they prefer returns over liquidity.

The major difference with SWFs is that PPFs have an explicit liability stream that comes from the pension contributions, and their investment horizon therefore depends on the timeline of such capital distributions.

Most SWFs do not recruit undergraduates, with some exceptions, such as GIC and Temasek (if you fit their profile). So, your best option in most cases is to gain traditional investment banking or private equity experience and use that to move in.

Chaired by Crown Prince Mohammed, the PIF gets its funding from borrowing, investment returns and transfers from the government. During the pandemic, for instance, it received a $40 billion transfer from the kingdom's foreign reserves held at the central bank in order to bet on a rebound in global stocks.

Latest Holdings, Performance, AUM (from 13F, 13D)

Public Investment Fund's top holdings are Uber Technologies, Inc. (US:UBER) , Lucid Group, Inc. (US:LCID) , Electronic Arts Inc. (US:EA) , Take-Two Interactive Software, Inc.

Norway's sovereign wealth fund, the world's largest, was established in the 1990s to invest the surplus revenues of the country's oil and gas sector. To date, the fund has put money in more than 8,500 companies in 70 countries around the world.