Largest Sovereign Wealth Funds (SWFs) 2015

In the latest 2015 ranking, Norway’s Government Pension Fund–Global with assets for $824.9 billion, ranks first, followed by the Abu Dhabi Investment Authority with US$773 billion. Both funds are financed via oil revenue.

Sovereign wealth funds (SWFs) are managed separately from official currency reserves. They are pools of money governments use to generate profits. Often this money is invested in foreign companies. Their assets can include balance-of-payments surpluses, official foreign currency operations, proceeds of privatizations, fiscal surpluses and/or receipts resulting from commodity exports.

They can be structured as a fund, pool or corporation. They do not include foreign currency reserve assets held by monetary authorities for the traditional balance-of-payments or monetary policy purposes, state-owned enterprises (SOEs) in the traditional sense, government-employee pension funds or assets managed for the benefit of individuals.

SWFs may originally be created to reduce the volatility of government revenues, to counter the adverse effects of volatility in financial cycles on government spending and the national economy, or to build up savings for future generations.

SWFs usually invest globally, although some also invest indirectly in domestic state-owned enterprises. In addition, they tend to prefer returns over liquidity and thus have a higher risk tolerance than traditional foreign exchange reserves. After some SWFs made bad investments in Wall Street financial firms prior to the 2007-2008 financial crisis, there is some evidence – and much speculation – that SWFs may dial back somewhat on their risk tolerance.

Although a few funds were created before 2000, the number of sovereign wealth funds has increased dramatically only in the last 14 years.

Critics of SWFs point out that as this asset pool continues to expand in size and importance, so does its potential impact on various markets. In addition, foreign investment by SWFs raises some national security concerns because of speculation that the purpose of the investment might be to secure control of strategically important industries for political rather than financial gain. Moreover, the lack of transparency for some of the funds – that is, size and source of funds, investment goals, internal checks and balances, disclosure of relationships and holdings in private equity funds – has been another cause for concern by investors and regulators. The International Monetary Fund’s Santiago Principles have tried to address these concerns.