Both the number of, and the value of sovereign wealth funds (SWFs) grew steadily during the last decades. A total of 73 new sovereign wealth funds were established worldwide during the 12 years from 2010 to 2022. That is 23 more wealth funds than the decade before that, and a higher number than the total of all
during the years prior to 2000. Asia and the Middle East and North Africa are the
of SWFs, with countries such as China and the United Arab Emirates managing trillions of dollars in SWF assets, only one European country made it into the top ten
What is a sovereign wealth fund?
SWFs are state-owned investment funds, commonly (but not always) funded by budget surplus generated from the country’s natural resources or foreign currency reserves. The object of a SWF is to generate an
annual return on investments through effective
asset allocation. The revenues generated from successful portfolio management are then used to better the local economy and society or reinvest to generate further profit. While all investments include some level of risk, some asset types are more risky than others. In an effort to decrease risk SWFs tend to allocate the majority of assets to equity or fixed-income securities. Leaving a smaller portion of
assets to be managed through alternative investment securities.
Individual fund performance
Despite being only the third largest region in terms of assets under management, Europe, and more specifically Norway, holds the
second largest sovereign wealth fund in the world: Norges Bank Investment Management (NBIM). The fund, also known as Norway’s Oil Fund, was founded in 1990, soon after Norway discovered their oil and experienced rapid economic growth. Since its establishment the fund grew markedly and today
the NBIM has market value of around 1.26 trillion U.S. dollars, with most of the assets in equities. While the fund performance of Norway is notable, the CIC or China investment corporation takes the leading spot. China overall is the
country with the highest value of assets under management of sovereign wealth funds. The reason behind this is that China has two of the four largest sovereign wealth funds in the world: the CIC, and the fourth largest, State Administration of Foreign Exchanges.
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