Sovereign Wealth Fund - SWF

AAA

DEFINITION of 'Sovereign Wealth Fund - SWF'

Pools of money derived from a country's reserves, which are set aside for investment purposes that will benefit the country's economy and citizens. The funding for a sovereign wealth fund (SWF) comes from central bank reserves that accumulate as a result of budget and trade surpluses, and even from revenue generated from the exports of natural resources. The types of acceptable investments included in each SWF vary from country to country; countries with liquidity concerns limit investments to only very liquid public debt instruments.

INVESTOPEDIA EXPLAINS 'Sovereign Wealth Fund - SWF'

Some countries have created SWFs to diversify their revenue streams. For example, the United Arab Emirates (UAE) relies on oil exports for its wealth. Therefore, it devotes a portion of its reserves to an SWF that invests in other types of assets that can act as a shield against oil-related risk.

The amount of money in these SWF is substantial. As of May 2007, the UAE's fund was worth more than $875 billion. The estimated value of all SWFs is pegged at $2.5 trillion.

RELATED TERMS
  1. Brunei Investment Agency

    The Brunei Investment Agency is a government-owned investment ...
  2. Revenue Regulation Fund

    The Revenue Regulation Fund is a sovereign wealth fund for the ...
  3. Hong Kong Monetary Authority Investment ...

    A sovereign wealth fund of the Government of the Hong Kong Special ...
  4. State Oil Fund (Azerbaijan)

    A sovereign wealth fund established by the Republic of Azerbaijan. ...
  5. Alberta Investment Management Corporation ...

    A government-owned investment-management corporation headquartered ...
  6. Pula Fund

    The Pula Fund is a sovereign wealth fund established in 1994 ...
RELATED FAQS
  1. How do central banks acquire currency reserves and how much are they required to ...

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Sovereign Wealth Funds - Friend Or Foe?

    With $5.86 trillion in assets as of September 2013, SWFs have a great deal of clout in financial markets. But as the majority of SWFs are located in the Middle East and Asia, whether these largely ...
  2. Economics

    Exploring The Current Account In The Balance Of Payments

    Learn how a country's current account balance reflects the country's economic health.
  3. Mutual Funds & ETFs

    An Introduction To Sovereign Wealth Funds

    Countries use sovereign wealth funds to stabilize their economies, but these investments can lack transparency.
  4. Personal Finance

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
  5. Economics

    Analysing Risks On The Upcoming UK General Elections

    Rising UK political risk keeps investors funds on the sideline.
  6. Investing Basics

    What Is Cold Storage For Bitcoin And Why Does It Matter?

    With increasing incidents of hacking in the world of digital currency, cold storage offers a safe place for the cryptocurrency owners.
  7. Economics

    Sectors Hit by Sanctions on North Korea

    We look at the sectors most affected by the US sanctions imposed against North Korea.
  8. Mutual Funds & ETFs

    These 4 Precious Metals ETFs Help Combat Inflation

    A look at 4 precious metal ETFs to combat inflation when it hits.
  9. Professionals

    Are Alternative Mutual Funds, ETFs Right for You?

    Alternative mutual fund and ETFs are gaining popularity but are they a good idea for your regular Joe investor?
  10. Stock Analysis

    Can Modi Mania Continue?

    Investors are still swooning over India’s new prime minister, Narendra Modi, whose pro-business platform inspired a record voter turnout of 66 percent in May.

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
Trading Center