Sovereign wealth fund
A sovereign wealth fund is a state-owned fund of the accumulated reserves that arise from running a trade surplus with other countries.
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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Coventry Building Society bids £780m for Co-operative Bank - what could it mean for customers?
Coventry Building Society has put in an offer of £780 million to buy Co-operative Bank. When will the potential deal happen and what could it mean for customers?
By Vaishali Varu Published
-
Review: Three magnificent Beachcomber resorts in Mauritius
MoneyWeek Travel Ruth Emery explores the Indian Ocean island from Beachcomber resorts Shandrani, Trou aux Biches and Paradis
By Ruth Emery Published