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A sovereign wealth fund, also known as ‘social wealth funds’ and are generally considered to be investment funds that are owned and operated by states.
These types of funds can invest in a ton of different assets, including company stocks, investment bonds, and even real estate.
In some cases, commodities can also be included.
We’re going to take a closer look at sovereign wealth funds and give you all of the information that you need to know about.
When a state government has a national surplus in their economy, they may consider launching or creating a sovereign wealth fund.
They have become very common since the turn of century as more governments realize the benefits that come from them.
These types of funds can be strategic tokens, similar to that of a rainy day fund.
Sovereign wealth funds can be volatile and unpredictable, depending on how the state manages the portfolio of the fund.
It is less likely for a government to want to operate a sovereign wealth fund during times when it is taking on a lot of debt.
Every state may have a different reason for wanting to have this type of fund, but strategic financial funds are never a bad thing for a country experiencing a surplus in their economy.
Are Sovereign Wealth Funds Common?
While sovereign wealth funds have been around for up to one hundred years, they’ve become significantly more popular in the last two or three decades.
One major example that is commonly referenced is the point in time when the State of Texas within the United States decided to use this type of fund to help cover the costs of education.
A financial report from the 2021 calendar year showed more than $8 trillion dollars existed in sovereign wealth funds around the world.
Most of the money came from countries that had a major economic reliability on oil exports.
More than 70% of all sovereign wealth funds are from Asian countries or Middle Eastern countries.
Now that we’ve spent a little bit of time talking about how common sovereign wealth funds are, let’s shift our focus and discuss which funds are the largest.
There are dozens and dozens of funds that are worth billions of dollars, but you might be surprised to learn about which funds are at the top of the list.
Largest Sovereign Wealth Funds In The World
Here’s a compiled list of the top-30 largest sovereign wealth funds that are currently in existence.
As you can see, a majority of these funds come from either Asia, or the Middle East.
There are fewer sovereign wealth funds established in Europe and North America of this scale.
- China Investment Corporation (Asia)
- Norway Government Pension Fund Global (Europe)
- Abu Dhabi Investment Authority (Middle East)
- Kuwait Investment Authority (Middle East)
- GIC Private Limited (Asia)
- Public Investment Fund (Middle East)
- Hong Kong Monetary Authority Investment Portfolio (Asia)
- Temasek Holdings (Asia)
- Qatar Investment Authority (Middle East)
- National Council for Social Security Fund (Asia)
- Investment Corporation of Dubai (Middle East)
- Turkey Wealth Fund (Middle East)
- Mubadala Investment Company (Middle East)
- National Welfare Fund (Europe)
- Korea Investment Corporation (Asia)
- Abu Dhabi Developmental Holding Company (Middle East)
- National Development Fund of Iran (Middle East)
- Future Fund (Australia and Pacific)
- Alberta Investment Management Corporation (North America)
- Emirates Investment Authority (Middle East)
- Alaska Permanent Fund Corporation (North America)
- Brunei Investment Agency (Asia)
- University of Texas Investment Management Company (North America)
- Samruk-Kazyna (Asia)
- Libyan Investment Authority (Africa)
- Texas Permanent School Fund (North America)
- Kazakhstan National Fund (Asia)
- State Oil Fund of Azerbaijan(Asia)
- Ethiopian Investment Holdings (Africa)
- New Zealand Superannuation Fund (Australia and Pacific)
To make things a little bit clearer, the China Investment Corporation sovereign wealth fund is estimated to be worth more than $1.3 trillion dollars in the top position.
Comparatively speaking, the 30th largest fund is recognized as the New Zealand Superannuation Fund and is worth about $35 billion dollars.
These numbers are so incredibly large that it may be difficult to comprehend at times, but these are the largest sovereign wealth funds in the world.
Conclusion
Based on everything that we’ve talked about in regard to sovereign wealth funds, it’s easy to understand why they’ve become so much more popular in recent decades.
There are advantages for establishing a fund like this, especially for countries or states that are experiencing a massive surplus financially.
We’ve covered the massive difference in value between the top sovereign wealth fund and one that is farther down the list.
In some cases there can be billions or even trillions of dollars in valuation differences.
While these differences may be arbitrary to some people, they have a massive impact on the rankings of the top sovereign wealth funds.
Generally, establishing a sovereign wealth fund can benefit a country’s economy in the future.
The country will need very little debt or even no debt at all for this to be fully effective.
Future generations could benefit from sovereign wealth funds when everything lines up ideally.
Sovereign wealth funds could become more important in the coming years as their positive trend continues.
Estimates show that the total amount of money invested in sovereign wealth funds could reach more than $10 trillion dollars in the coming years.
We hope you enjoyed this article on sovereign wealth funds. If you have any questions, please send an email or leave a comment below.
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Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
