What Is the Revenue Regulation Fund (RRF)?

The term Revenue Regulation Fund (RRF) refers to a sovereign wealth fund (SWF) established and operated by the government of Algeria. Founded in 2000, the fund is formally known as the Fond de Regulation des Recettes. It was Africa's largest sovereign wealth fund. The RRF is funded primarily by tax revenue collected from companies exploiting the nation's oil and gas reserves.

Key Takeaways

  • The Revenue Regulation Fund is a sovereign wealth fund owned and operated by the government of Algeria.
  • The fund was established from surplus revenues earned from taxes on its oil and gas reserves.
  • The main purpose of the fund is to stabilize the national economy and provide a cushion against the impact of volatility in oil and gas prices.

Understanding the Revenue Regulation Fund (RRF)

Sovereign wealth funds are state-owned investment vehicles. The origin of these funds may be commodity- or noncommodity-related. Funding is derived from a variety of sources including fiscal surpluses, tax revenue, resource exports, surpluses from balance of payments, and transfer of payments from the government.

The purpose of individual funds may vary. These objectives may include saving for future generations, funding social and economic development, funding for a nation's private sector, political reasons, protecting an economy from volatility in commodity prices, as well as capital growth and preservation.

The Revenue Regulation Fund or the Fond de Regulation des Recettes was one of Africa's largest sovereign wealth funds. As mentioned above, the fund was founded in 2000 in Algeria, Africa's largest nation in landmass, with the Sahara Desert making up four-fifths of its nation. The fund originates from surplus revenues earned from taxes on the development of Algeria's hydrocarbons, primarily its oil and gas reserves. It was established primarily to act as an economic stabilization factor to cushion the impact of volatility in oil and gas prices on the government of Algeria.

Like most SWFss, the RRF operates largely out of the public eye and its operations are wrapped in secrecy. It had about $57 billion in assets under management (AUM) as of 2012, according to a report from the European Investment Bank. That figure grew to $72.6 billion in 2019, as reported in Ressources, a French-language magazine that covers natural resources industries in Africa. But Sovereign Wealth Fund Institute, an organization that provides information on the world's SWFs and ranks them based on assets, reported that the RRF had no assets as of December 2020.

Investors who want to invest in Algeria and other African nations may consider vehicles such as exchange-traded funds or American depositary receipts.

Revenue Regulation Fund (RRF) vs. Other Sovereign Wealth Funds

The Brown Capital Management Africa Forum noted that there has been an increased interest in state-sponsored investment funds like the RRF over the past 20 years. They tend to be established in response to high commodity prices or large foreign exchange reserves. Although some investment funds are recent creations by developing nations, others are well established. Africa’s many sovereign wealth funds are relatively new and volatile.

RRF is among the many SWFs found in Africa. The Libyan Investment Authority, established by oil-rich Libya, has about $60 billion in assets. Much smaller funds are run by the governments of Botswana ($5.5 billion), Angola ($2.3 billion), and Nigeria ($1.7 billion).

As of December 2020, the five largest SWFs in the world were:

  • Norway Government Pension Fund Global ($1.122 trillion)
  • China Investment Corporation ($1.045 trillion)
  • Abu Dhabi Investment Authority ($579.62 billion)
  • Kuwait Investment Authority ($533.65 billion)
  • Hong Kong Monetary Authority Investment Profile ($528 billion)