Sovereign wealth funds are state owned collections of stocks, bonds and other assets. They are often funds which come about as a result of a significant amount of surplus cash held by the country in question. Not every country has such funds, but those that do are often saving for the future, giving future generations some form of security.
1. The largest of the sovereign wealth funds is called the Abu Dhabi Investment Authority – owned by Abu Dhabi, United Arab Emirates. Much of this country’s wealth is based on oil, a resource they still have a large quantity of. They are saving for the future however, as the oil supplies will eventually run out. The current estimated size of the fund is 627 billion dollars.
2. Saudi Arabia comes in at 431 billion dollars, with the Saudi Arabian Monetary Agency (SAMA), which was formed in 1952. The fund was set up at a time when Saudi Arabia did not have a currency of its own. It is another example of sovereign wealth funds being at the center of very forward thinking in terms of getting a country into a western way of operating as well as planning for a future where oil wealth dries up and other industries have to be developed so the people and state has a way to make money.
3. The third largest of all sovereign wealth funds is that of the Government Pension Fund of Norway, which comes in at 395 billion dollars. Again, this fund takes the nation’s considerable wealth (for a nation of 4.8 million people, this fund is truly massive) and makes investments that will see a return over a number of years. As the name suggests, this fund will provide a comfortable pension for the hard working members of the Norwegian state.
4. State Administration of Foreign Exchange, or SAFE, is owned by the People’s Republic of China and manages the country’s foreign exchange reserves, as well as regulating the foreign exchange market in that state. 347.1 billion dollars is the current value of the fund, which, like the other sovereign wealth funds, aims to solidify China’s position as a financial powerhouse and general global power.
5. The China Investment Company comes in at number 5, currently thought to be worth around 298 billion dollars. The wealth of the Chinese state is considerable and is demonstrated by the fact that there are 2 huge investment funds from this country in the top 5.
Sovereign wealth funds provide nations with a huge surplus to capitalize on this wealth – and ultimately become more wealthy.
Gino Hitshopi is highly experienced in the realm of sovereign wealth funds, having worked in the investment industry for many years. For more information please visit: http://www.preqin.com/section/infrastructure/4
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