Sovereign wealth fund

A sovereign wealth fund (SWF) is state owned. Typically, it is funded by a country’s central bank from the accumulated reserves that arise from running a trade surplus with other countries. The fund is usually tasked with a specific investment objective that will benefit its country’s citizens.

In short, like any investor, its job is to earn a decent return on its capital while avoiding too much risk. For an oil-rich Gulf state, that might involve finding investments – say, London property – that diversify the state’s revenue streams (so rent is earned alongside oil money).

The range of investments such a fund can choose varies – some are restricted only to very liquid public securities, for example. The size of each fund varies too, but some are huge – the estimated value of all SWFs is more than $2trn.

MoneyWeek magazine

Latest issue:

Magazine cover
Faster and faster...

The frenzied pace of the high-tech revolution

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.