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 >>
  2. How can I calculate the Macaulay duration of a zero-coupon bond?

    The funds from operations is a measure of the amount of cash flow that a business's operations generates. Real estate investment ... Read Full Answer >>
  3. What are the advantages of hiring a third-party marketing company?

    Hiring a third-party marketing company's services offers a number of advantages for businesses - primarily savings, since ... Read Full Answer >>
  4. What does a positive capital account balance mean?

    A positive capital account balance indicates that more money is flowing into, rather than out of, a country. A country's ... Read Full Answer >>
  5. What does a negative balance in the capital account mean?

    A negative capital account balance indicates a predominant money flow outbound from a country to other countries. The implication ... Read Full Answer >>
  6. How does a capital account illustrate the strength of investment markets for a country?

    A nation's capital account can be a major indicator of how much interest the nation generates among foreign investors. A ... 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. Mutual Funds & ETFs

    Top Skills Hedge Funds Look For In Job Candidates

    Lucrative salary, high perks, and best quantitative brains at work. What are the top skills a candidate needs to get a job at a hedge fund?
  6. Mutual Funds & ETFs

    Why Hedge Fund Managers Make Good Advisory Clients

    Super-busy hedge fund managers should be viewed as an opportunity for sophisticated financial advisors who can step in and offer their services.
  7. Professionals

    A Look at How the Ultra-Wealthy Invest

    Ultra-wealthy investors are cautious this year as they approach the markets. Many target mutual funds and stocks, but most also diversify their portfolios.
  8. Fundamental Analysis

    Can You Invest in China's Huawei?

    Have you heard of giant Chinese telecom maker Huawei? Here's what you need to know.
  9. Investing

    Should You Buy Marijuana Stock?

    The legalization of marijuana has created a new investment niche: pot stocks.
  10. Forex

    Is Bitcoin Mining Still Profitable?

    Recent changes in technology and the creation of professional mining centers individual miners are asking themselves, is bitcoin mining still profitable?

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center