Sovereign Wealth Fund - SWF

What is a 'Sovereign Wealth Fund - SWF'

A sovereign wealth fund (SWF) consists of 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.

BREAKING DOWN '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. Revenue Regulation Fund

    The Revenue Regulation Fund is a sovereign wealth fund for the ...
  2. Generally Accepted Principles And ...

    Standardized business procedures related to the operation of ...
  3. Sovereign Debt

    Bonds issued by a national government in a foreign currency, ...
  4. Government Investment Unit - Indonesia

    A sovereign wealth fund established in Indonesia and managed ...
  5. Sovereign Credit Rating

    The credit rating of a country or sovereign entity. Sovereign ...
  6. Kuwait Investment Authority

    The Kuwait Investment Authority (KIA) is a government-owned corporation ...
Related Articles
  1. Investing News

    Will Sovereign Wealth Funds Roil Equities Markets?

    An increase in redemptions by oil economies will have an adverse effect on global equities and exacerbate an already fragile global economy.
  2. Investing News

    Cheap Oil Saps Gulf Sovereign Wealth Funds

    According to a report published by the Financial Times on Sunday, the rate at which Gulf Sovereign Wealth Funds have redeemed their money from asset managers has increased to a record high.
  3. Economics

    The Balance Of Trade

    The balance of trade is the difference between a country’s imports and exports. A trade deficit occurs when a country buys or imports more goods from other countries than it sells or exports. ...
  4. Investing News

    The UAE: An Emerging Economy for Investors

    The learning from UAE on how it succeeded with timely diversification when the BRICS nations and the neighboring oil-rich economies faced challenges.
  5. Bonds & Fixed Income

    The Risks Of Sovereign Bonds

    Sovereign debt can play an important role in providing international diversification to individual investors.
  6. Personal Wealth & Private Banking

    How to Measure Wealth

    Wealth is the value of all assets a person, company, country or other entity owns, minus all owed debts.
  7. Economics

    What does Current Account mean?

    The current account reflects the difference between a country’s savings and investments.
  8. Term

    Why Countries Keep Reserve Currency

    Central banks and financial institutions hold large amounts of foreign money as their reserve currency.
  9. Term

    Understanding Net Exports

    Net exports are the difference between a country’s exports and imports.
  10. Personal Finance

    Do You Need Wealth Management?

    Wealth management is a service that combines financial and investment advice, accounting and tax services, and legal and estate planning.
RELATED FAQS
  1. How does a capital account illustrate the strength of investment markets for a country?

    Understand what a country's capital account is and how the capital account level can be used to gauge the strength of investment ... Read Answer >>
  2. 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 Answer >>
  3. What does it mean when a country has little activity in its capital account?

    Know what a country's capital account represents and understand what the implications are if a country has little activity ... Read Answer >>
  4. What economic indicators are most used when forecasting an exchange rate?

    Discover what economic indicators are most widely used to forecast a country’s exchange rate and how various factors influence ... Read Answer >>
  5. What does a negative balance in the capital account mean?

    Understand what a country's capital account represents and the significance of a negative, or deficit, balance in the capital ... Read Answer >>
  6. What is the difference between a global fund and an international fund?

    In the English language, "global" and "international" tend to be used interchangeably - hence the confusion in the investing ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center