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What are sovereign wealth funds? Here are the world's 10 largest funds

By Finserv MARKETS - Aug 3,2019
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Introduction

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

  • Fiscal surpluses

  • 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 are sovereign wealth funds? Here are the world's 10 largest funds

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.

What are sovereign wealth funds? Here are the world's 10 largest funds

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.

Conclusion:

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