As the name suggests, sovereign wealth funds are simply a mode through which countries make investments. You will notice that the countries using these Sovereign Wealth Funds (SWFs) are economies that rely on one source of income, like the oil reserves fuelling the economy in the Middle East. Thus, SWF investment effectively helps to diversify this single stream of income.
Down to the nitty-gritty of sovereign funds
A Sovereign Wealth Fund (SWF) is a state-owned investment fund or entity that is commonly established from:
Balance of payments surpluses
Official foreign currency operations
The proceeds of privatizations
Governmental transfer payments
And/or receipts resulting from resource exports
But these don’t include the foreign reserves held by monetary authorities for the traditional balance of payments or monetary policy purposes, government-employee pension funds or state-owned enterprises.
In summary, SWFs are state-owned funds composed of a plethora of financial assets including stocks, bonds, real estate, precious metals and other financial instruments. And these have been on a growth trajectory, as evidenced by the assets of global sovereign wealth funds from December 2010 to June 2018:
What is a Sovereign Wealth Enterprise?
A Sovereign Wealth Enterprise is a sovereign investment vehicle that is owned and controlled by a sovereign wealth fund.
The statistics below present the world’s 10 largest sovereign wealth funds based on the value of assets under management as of May 2019. As you can see from the figure, the Norwegian Government’s Pension Fund was the largest SWF globally, amounting to managed assets over 1 trillion US dollars.
Government Pension Fund – Global (Norway)
Norway’s SWF is currently the world’s biggest investors in stocks, owning $1 trillion1 of shares in over 9,000 companies worldwide including Apple and Microsoft, a major landmark since this crude-oil-producing country started investing in SWFs in 1996.
China Investment Corporation (China)
It was created more than a decade ago to diversify China’s foreign exchange holdings and now has a value of around $941 billion.
Abu Dhabi Investment Authority (UAE)
With managed assets worth the US $696 billion, this fund comes in third place. In a fairly recent development, Abu Dhabi Investment Authority (ADIA) set up a distressed assets fund in India to target non-performing asset (NPA) opportunities, anchoring it with a $500 million commitment
Kuwait Investment Authority (Kuwait)
It is the world’s oldest sovereign investment fund1 in the world. At over $592 billion, it is the 4th largest SWF.
Hong Kong Monetary Authority Investment Portfolio (China – Hong Kong)
The Exchange Fund of the Hong Kong Special Administrative Region (HKMA IP) is a Sovereign Wealth Fund located in Hong Kong, Asia and was founded in 1935.
SAFE Investment company (China)
At $439.8 billion, SAFE Investment Company primarily makes its investments into securities, currencies and commodities markets.
GIC Private Limited (Singapore)
This Singapore-based SWF entails assets worth $390 billion under management, works on a tripartite portfolio system: reference portfolio, policy portfolio and an active portfolio.
Temasek Holdings (Singapore)
It presents itself as a holding company owned by the government of Singapore. Current Assets Under Management (AUM) for Temasek is $374 billion.
National Council for Social Security Fund (China)
The National Social Security Fund is a supplementary fund of the People’s Republic of China which is used for social security.
Public Investment Fund (Saudi Arabia)
Public Investment Fund of Saudi Arabia (PIF) is a Sovereign Wealth Fund located in Riyadh Saudi Arabia and was founded in 1971.
Even nations realise the importance of investing in stocks to diversify and spread their risks. There’s no reason you shouldn’t! The best way for you to go down the stock investing route is via mutual funds. Mutual funds investments are one of the best options you if you do not have the expertise to invest in the market, but have the appetite to do so. Top-rated mutual funds are run by professional managers who pick different instruments to invest in, so you can rest assured about optimum investment permutations and combinations. Since mutual funds pool capital from different investors, it reduces the overall risk of investment. Immediate diversification is one of the key advantages of mutual funds. Not only is your fund professionally managed, when you invest in mutual funds at Finserv MARKETS, you also get financial planning tips and investment advice in just a few clicks. Since Securities and Exchange Board of India (SEBI) regulates the functioning of mutual funds, they are a safe bet to invest in, regulation-wise too. Setting up a mutual funds account online at Finserv MARKETS is extremely simple too: all you need to do is submit your KYC documents and fill up a few details on the website. Just watch as your goals of financial growth are met by these mutual funds.
Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!