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.

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.

Norway is home to the biggest sovereign wealth fund globally, valued at nearly $1.4 trillion. In 2023, the fund posted record profits, bolstered by tech holdings that include Microsoft, Apple, and Nvidia.

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.

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.

PIF has been recognized as the world's most valuable sovereign wealth fund (SWF) brand, according to new data by Brand Finance.

The Government Pension Investment Fund of Japan remains the largest asset owner in the world, with an AUM of US$1.4 trillion alone.

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.

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.

Many nations use sovereign wealth funds as a way to accrue profit for the benefit of the nation's economy and its citizens. The primary functions of a sovereign wealth fund are to stabilize the country's economy through diversification and to generate wealth for future generations.

As defined by the US Department of the Treasury, sovereign wealth funds (SWFs) are government investment funds (or pools of money) funded by foreign currency reserves but managed separately from official currency reserves which governments use to invest, typically in foreign companies.

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.

In the 1990s, Norway's Government Pension Fund Global was established to shield the economy from the fluctuations in oil prices. Surplus revenues from the country's oil and gas sector are transferred to the fund and invested in more than 9,300 companies in seventy countries.