Norway's Sovereign Wealth Fund - the Government Pension Fund Global-just crossed $1 trillion dollars in assets. Weakness in the U.S. dollar, combined with the robust equity markets have driven the fund's dollar value past the landmark.
When countries have excess reserves, they sometimes create investment vehicles that deploy that money and generate returns for the nation itself. Such funds are calledsovereign wealth funds (SWF) and in some cases they have a gigantic corpus.The money in such funds is managed partly in-house and partly by external managers in some cases. Investments of the SWFs are across the globe and in a range of asset classes including equities, debt, real estate and alternative assets such as hedge funds or private equity. (Read also: An Introduction to Sovereign Wealth Funds)
But there is an important distinction that needs to be made. While the money is held in the country’s reserves and is invested, the SWF is different from a national pension fund like the Social Security Trust Fund or the California Public Employees' Retirement System (CalPers.) The main difference is that SWF money belongs to the state, whereas the money in pension funds is eventually paid out to the people.A lot of the SWFs of nations in the Middle East were set up to invest the windfall that these countries gained from the oil boom in the middle of the twentieth century. (Read also: Where Do Pension Funds Typically Invest?)
Here’s a look into the largest sovereign wealth funds by assets under management.
1. Government Pension Fund Global—Norway
Even though its name has the word pension fund, Norway’s sovereign wealth fund is the largest in the world and with over $1 trillion in assets it is growing fast. While the fund was set up as the Petroleum Fund of Norway to invest the surplus from oil sales, it changed to its current name in 2006. It is managed by the Norwegian Central Bank, the Norges Bank and in the last year alone, it made gains of close to $53 billion, thanks to the rally in U.S. stocks. In the first half of this year the fund has given a 6.48% return.The asset allocation mix is tilted in favor of equities with 65.1%, fixed income at a little over 32.4% and 2.5% in real estate.Some of the fund’s biggest equity holdings include Nestlé SA, Royal Dutch Shell (RDS.A), Amazon (AMZN), Apple (AAPL), Alphabet (GOOGL) and Microsoft (MSFT).
2.Abu Dhabi Investment Authority
The Abu Dhabi Investment Authority was established in 1976 and as of the end 2015 its assets under management were $828 billion according to theSovereign Wealth Fund Institute, which calls it the largest SWF in the Middle East. In its2015 annual report, the fund boasts of 20-year annualized return of 6.5% and a 30-year annualized return of 7.5%. The fund deploys 32-42% in developed equities, 10-20% in government bonds, 5-10% in real estate and holds about 10% of its assets in cash. Geographically, its exposure to North America can be 35-50% of its assets; 20-35% of assets can be allotted to Europe and while 15-25% could go to emerging markets. TheADIAinvested inCitiat the very beginning of the 2008 financial collapse, but eventually sued the group for misrepresentation,reportedthe Wall Street Journal.
3. China Investment Corporation—China
Set up in 2007 with $200 billion in capital and a mandate to generate returns through diversification of China’s foreign exchange holdings, the latest figures available put this fund’s assets under management at $813.5 billion as ofDecember 2016. Over 45.8% of the fund’s capital has been invested in equities across the world, 37% in alternate investments, 15% in fixed income investments and 1.8% is kept in cash. Last year, the fund delivered a generous 6.2% return.
4. Kuwait Investment Authority—Kuwait
This is the oldest sovereign wealth fund in the world, established in 1953 and notorious for keeping its financials and strategies very close to its chest. According to the Sovereign Wealth Fund Institute, the fund currently has $524 billion in assets. It was set up to invest oil surplus revenues and to reduce the dependence of the country on oil reserves. The Wall Street Journal reported that the KIA invested $3 billion in Citi and $2 billion in Merrill Lynch as both banks scrambled for funds at the start of the financial crisis in 2008, eventually selling its Citi stake for a $1.1 billion profit a year later.
5. SAMA Foreign Holdings—Saudi Arabia
The Saudi Arabian Monetary Authority is the nation’s central bank with assets of over $514 billion, according to the Sovereign Wealth Fund Institute. It invests in assets classes across the globe through different subsidiaries, the most public being the Public Investment Fund (PIF). Last year Bloomberg reported that the Saudi ownership of U.S. Treasuries stood at $116.8 billion as of March 2016. The PIF also made news with its $3.5 billion investment in Uber Technologies in June last year.
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OSLO, Jan 30 (Reuters) - Norway's $1.6 trillion sovereign wealth fund, the world's largest, reported on Tuesday a record profit of 2.22 trillion crowns ($213 billion) in 2023, driven by strong returns on its investments in technology stocks.
Why does Norway have such a large sovereign wealth fund? ›
Background. Norway has experienced economic surpluses since the development of its hydrocarbon resources in the 70s. This reality, coupled with the desire to mitigate volatility stemming from fluctuating oil prices, motivated the creation of Norway's Oil Fund, now the Government Pension Fund-Global (GPF-G).
Does the US have any sovereign wealth funds? ›
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.
What are the four types of sovereign wealth funds? ›
The various types of sovereign wealth funds include stabilization funds, savings or future generation funds, pension reserve funds, reserve investment funds, and strategic development sovereign wealth funds. Each fund has its own unique focus and financial objectives.
Who owns sovereign wealth funds? ›
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 funding for a SWF can come from a variety of sources.
Does Russia have a sovereign wealth fund? ›
The National Wealth fund is controlled by the Ministry of Finance. Funds comprise liquid assets and long term investments. In December 2022 long term investments stood at 4.3 trillion rubles, with liquid assets at 6.1 trillion rubles.
Why doesn't Britain have a sovereign wealth fund? ›
Britain did not opt for such a scheme when its North Sea oil boom began in the 1970s. Instead, successive governments used the proceeds from oil and gas fields to keep public borrowing down rather than to build a fighting fund to tackle long-term problems such as our ageing population.
What is the return rate for sovereign wealth funds? ›
Source: Global SWF, Bloomberg, as of 31 December 2023. The average 10-year return (2012–2022) for SWFs was 6.1% versus 6.7% for the classic 60/40 portfolio.
What is the 3% rule in Norway? ›
It is believed that the fund will grow with more than 3% yearly over time, which makes it possible to allocate up to 3% to the yearly budget without decreasing the value of the fund. The rule was introduced in 2001 during the First cabinet Stoltenberg, and has a broad cross-party support.
The fund is for the citizens of Norway. “The aim of the fund is to ensure responsible and long-term management of revenue from Norway's oil and gas resources, so that this wealth benefits both current and future generations.” Today the fund is worth nearly $275,000 for every citizen of Norway.
What will happen when Norway runs out of oil? ›
“We've got electric trains, of course, but rail freight depends on motor vehicles at each end of the track. Without oil, aviation, shipping and road haulage would cease. Global trade would face major difficulties as a result.”
What are the cons of sovereign wealth funds? ›
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.
Why don't the USA have a sovereign wealth fund? ›
The United States has very limited state owned enterprises. The closest we get are public utilities and these are available for investment, often on the NYSE. We also allow the use of Treasury bills and bonds and US savings bonds. Our President does not regulate the budget; Congress does.
Do sovereign wealth funds pay taxes? ›
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.
What is the largest PIF in the world? ›
The Public Investment Fund (PIF; Arabic: صندوق الاستثمارات العامة) is the sovereign wealth fund of Saudi Arabia. It is among the largest sovereign wealth funds in the world with total estimated assets of US$925 billion (£726.3 billion).
What is the largest pension fund in the world? ›
The Government Pension Investment Fund of Japan (GPIF) remains the largest pension fund, and tops the table with assets of 1.4 trillion dollars. It has held the top spot since 2002. Meanwhile, the Employees' Provident Fund of India joins as the only new participant among the top 20 funds of 2022.
How many sovereign wealth funds are there in total? ›
Sovereign wealth funds (SWFs) have over $11.5 trillion in assets under management as of February 2023. Most of these 176 funds are sponsored by non-Western countries and their growth has made SWFs important international investors, particularly in private equity funding.
What is the largest private fund? ›
How Private Equity Works
| Rank | Private equity firm | Money Raised Over Five Years |
|---|
| 1 | Blackstone Inc. (ticker: BX) | $125.6 billion |
| 2 | KKR & Co. Inc. (KKR) | $103.7 billion |
| 3 | EQT AB (OTC: EQBBF) | $101.7 billion |
| 4 | Thoma Bravo LLC | $74.1 billion |
6 more rowsFeb 22, 2024
