July 09, 2025
4 mins read
A Sovereign Wealth Fund is like a savings account for a whole country, but it seems too huge to be true. Governments don't just let additional money from oil, gas, or trade sit around; they use it.
People put this money into stocks, bonds, real estate, or even infrastructure in the hopes that they will make money in the future. A Sovereign Wealth Fund is more than simply a tool to create money; it's also a way to make sure that future generations don't have to start from scratch.
Kuwait set up the first Sovereign Wealth Fund in the 1950s, but no one knew about it. At that moment, it was clear what had to be done: deal with the surplus oil the right way.
In the 2000s, things really took off. Prices were rising up, and countries were making more money because their reserves were getting bigger. It used to be a speciality instrument, but now it's essential for investing all over the world.
These funds help governments pay off their debts and keep the economy from going worse when national revenues go down. They do this without having to cut spending by a much.
They keep money safe for future generations, especially in countries with a lot of resources, so that today's wealth doesn't disappear when those resources run out.
This is when extra foreign exchange reserves are invested into markets to make more money than if they were just hanging around.
These funds are there to help governments pay for the pensions they owe in the future. Over time, this will help the government keep track of its money.
The country puts money into things like new ideas, technology, or infrastructure to help it grow.
These funds can do more than one thing at a time, such as saving, stabilising, and increasing. This gives people a variety of options on how to invest their money.
Give people money when things go wrong, such when revenues decline or markets become unstable.
Keep money safe from finite resources so that future generations have more than just stories of wealth.
Use excess reserves to make more money than short-term holdings while keeping your cash flow needs in check.
By starting new enterprises and selling goods and services in different regions throughout the world, you may not need to rely as much on natural resources.
Make sure that investments in technology, renewable energy, or infrastructure are in line with the country's long-term growth goals.
Back initiatives that make education, welfare, and progress better for everyone, and make sure that people can see the benefits beyond the numbers.
If you carefully divide up your assets, you may be able to keep the value of your native currency stable and ease inflationary pressures.
Don't become involved in the politics of money every day, but make sure your priorities are in line with the government's.
The following table highlights some of the major Sovereign Wealth Funds worldwide, showing their assets under management and primary sources of capital. In the table below, major global SFWs are given:
Country | Name of SWF | Assets Under Management (Approx.) | Primary Source |
Norway | Government Pension Fund Global | Holds over $1.5 trillion, making it one of the largest globally, funded primarily through oil and gas revenues. | Oil and Gas Revenue |
China | China Investment Corporation | Manages assets exceeding $1.3 trillion, sourced mainly from trade surpluses and foreign exchange reserves. | Trade Surpluses & FX Reserves |
UAE (Abu Dhabi) | Abu Dhabi Investment Authority | Oversees approximately $950 billion, accumulated through revenues from oil exports. | Oil Exports |
Singapore | GIC Private Limited & Temasek | Combined assets surpass $900 billion, funded mainly through fiscal surpluses from a diverse economy. | Fiscal Surplus |
Saudi Arabia | Public Investment Fund | Controls over $900 billion, largely built from oil revenue, focusing on diversifying the economy. | Oil Revenue |
Kuwait | Kuwait Investment Authority | Holds assets in $800 billion, primarily from oil revenues, with funding across global markets. | Oil Revenue |
Hong Kong | Hong Kong Monetary Authority Inv. | Manages more than $600 billion, sourced from foreign exchange reserves, to maintain financial stability. | FX Reserves |
A lot of sovereign wealth funds have plans for the short and long term. Some people just buy stocks and bonds. Some people work in private equity, real estate, or building things. What do you want to do? Think on safety and growth.
More ESG rules are coming. Funds now think about how the money they make affects people and the environment as well. Rebalancing your investments and keeping an eye on risk can help them stay robust. It's not about going with the flow; it's about making money and protecting the country's wealth.
When things are bad, provide money to help keep things stable and smooth out the economy's ups and downs.
Make sure that your money and savings last long enough for your children and grandchildren to enjoy.
Put your money into a wide range of assets and places if you want to make more money.
You can make macroeconomic policy stronger by keeping the currency stable and controlling the amount of money in circulation.
Being ability to handle changes in the world economy and political issues that affect how well things work.
When it's not clear who is in charge of making choices, bad governance happens.
Political participation in investment decisions can erode autonomy.
It's hard to get cash in international markets and the value of currencies changes, so you could lose money.
Sovereign Wealth Funds may seem like a strange idea, but they are really about being responsible. Take the additional money you have now and use it to preserve the future. That's what we stated we would do.
Of course, there are risks in politics, the stock market, and currencies. But it's evident that these funds have a major effect on how money goes throughout the world. If you want to know where a country's "savings account" really goes, you should study how a Sovereign Wealth Fund works.
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The primary purpose of a Sovereign Wealth Fund is to manage surplus national revenues, ensure economic stability, preserve wealth for future generations, and diversify funding to support long-term fiscal health.
SFWs are state-owned and funded by reserves or commodity revenues. In contrast, public pension funds are financed through contributions from individuals or employers, with a primary focus on providing retirement benefits to their members.
Norway, China, the UAE, and Singapore have some of the largest Sovereign Wealth Funds, managing assets sourced mainly from oil revenues, trade surpluses, and fiscal surpluses.
SWFs employ active and passive strategies that align with their distinctive mandates and risk profiles to invest across a range of asset classes, including infrastructure, private equity, and equities.
India does not have a traditional Sovereign Wealth Fund but operates the National Investment and Infrastructure Fund (NIIF), which focuses on mobilising capital for infrastructure and strategic investments.
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