Sovereign Wealth Fund

Sovereign wealth funds are typically created by countries with large surpluses, often from oil, gas or mineral exports, or from trade surpluses. Their goals can include saving wealth for future generations, stabilising the government’s budget when commodity prices fall and supporting national economic development.

Sovereign wealth funds invest in a wide range of assets, including shares, bonds, property, infrastructure and private equity, often internationally to diversify away from the domestic economy.

The largest include Norway’s Government Pension Fund Global, built from oil and gas revenues and worth well over a trillion US dollars, and large funds in China, the United Arab Emirates, Saudi Arabia, Kuwait, Qatar and Singapore.

For example, Norway’s fund owns small stakes in thousands of companies worldwide, and the government can withdraw only a limited share of its value each year to fund the budget.

Sovereign wealth funds can be powerful investors and sometimes raise concerns about political influence over foreign companies. The Santiago Principles, agreed in 2008, set voluntary standards for their governance, transparency and investment practices.