Sovereign Wealth Fund


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Sovereign Wealth Fund (SWF)

Funds owned by sovereign nations that invest the savings of an entire state, foreign exchange reserves, or excess liquidity.

Sovereign Wealth Fund

A government-owned company that invests that government's excess reserves. That is, if a country has a current account surplus or a positive balance of trade the government may deposit the excess funds into a sovereign wealth fund. The funds are invested in securities, companies, or projects in order to increase the government's net worth. Often a sovereign wealth fund pays for a government's social programs such as welfare or a state pension. The funds in a sovereign wealth fund are kept separate from the country's regular currency reserves. Sovereign wealth funds are common in oil-rich countries where the government owns a significant portion of the oil production facilities.

Sovereign wealth fund (SWF).

A sovereign wealth fund (SWF) is a government-owned enterprise that invests a portion of its country's foreign-exchange reserves in global financial markets.

These reserves consist of a balance of payments surplus, also called a current account surplus, that are created because the payments received in overseas currencies for the country's exports, such as natural resources or manufactured goods, exceed what its residents are paying for imports.

Unlike the traditional overseas investments that governments make to ensure liquidity, such as the purchase of US Treasury securities, SWF assets are separate from official reserves and are typically invested in the private sector to produce higher returns.

SWFs are controversial, in part because their investment strategies, portfolio holdings, and returns are generally secret and in part because of the concern that the sponsoring countries could exert substantial economic pressure on the companies and countries where they invest.

References in periodicals archive ?
Klaus Schmidt-Hebbel, Former Chief Economist, OECD, Professor of Economics, President Advisory Committee on Sovereign Wealth Funds, Chile
But Haywayd's visit comes amid reports that BP had been seeking the support of foreign sovereign wealth funds (SWF) following the collapse of its share price which increased the risk of possible takeover bids by rival companies.
Sovereign wealth funds in the Gulf region slowed down their investments in Western companies when oil prices started to tumble last year.
The loss of the $2.5 trillion does not include the decrease in market value incurred by the sovereign wealth funds, many of which have invested heavily in commercial real estate in North America.
To promote better deals, he has helped develop the Sovereign Wealth Fund Initiative at the Fletcher School.
For example, after receiving a US$3 billion investment from China's sovereign wealth fund, the CEO of Blackstone wrote an op-ed in the Financial Times warning against any measures to block SWF investment, comparing such steps to the Smoot-Hawley tariff.
The Norwegian sovereign wealth fund used to be called the "Government Petroleum Fund," but now it is named the "Government Pension Fund--Global." The only thing that has changed is the name: there has been no change in its objectives or in the way the fund is run.
bank or bank holding company by a sovereign wealth fund would be subject to Federal Reserve approval."
The FT on March 22 quoted US Treasury Assistant Secretary for International Affairs Clay Lowery as saying: "It's the first time to my knowledge that there's been a set of principles on this type of issue that include both sovereign wealth funds and a recipient country.
In this vein, we have considered two sets of principles: one for sovereign wealth funds and another for recipient countries of sovereign wealth fund investment.
In preparation for the spring European Council, the Union's finance ministers, meeting at the Ecofin Council on 4 March, adopted conclusions on a suggested code of conduct for sovereign wealth funds. Proposals for such a code - which is to be voluntary - were put forward by the European Commission on 27 February (see Europolitics 3480).
Singapore's sovereign wealth fund, GIC, is to take part in a funding round for Germany-based N26.