J1 & 2. Sovereign Wealth Funds

This morning I heard a podcast exploring a SWF by USA. So here's a general exploration of the context.

Overall Size

"With more than $12tn in assets (2024), SWFs have the power to move the dial on everything from healthcare to the energy transition, with emerging markets and private equity key targets for investment." For comparison, in the year 2000, SWFs held $1.2tn in assets" 

100 largest globally holding $13.7 trillion in assets. (2025). Top 10 have $9.6 trillion in assets

History & Raison d' etre

The term SWF was coined in 2005. 

SWFs in their early form often started out as commodity stabilization funds and grew from there.

Oldest -   "Kuwait Investment Authority, for example, established in 1953, was an early sovereign fund used to manage the Gulf nation’s then burgeoning oil wealth."

Then, between 2000 and 2010, 56 SWFs were created! Perhaps both the countries realised the value, and enough wealth to manage.

Although, still mainly Gulf region (oil wealth). 42% of global sovereign wealth assets are in oil-rich Middle East and North African (MENA) region countries. The next biggest placement of SWF wealth is Asia (34 %), followed by Europe (17 %). ANZ (4%), North America (3%).

Norway has the largest SWF.

What is a sovereign wealth fund (SWF)?

A sovereign wealth fund (SWF) is a state-owned investment fund, a type of institutional investor that invests for the benefit of a country’s own economy and citizens.

SWFs hold, manage, or administer assets to achieve their financial objectives. Goals often include diversification to help stabilize their country’s economic base, improve the management of their public finances, and support high-quality growth at home and abroad.

SWFs take a variety of forms; fiscal stabilization funds, savings funds, reserve investment corporations, development funds, and pension reserve funds without explicit pension liabilities.

Cross-border investing is a feature of sovereign wealth funds. Their investments have helped promote growth, prosperity, and economic development in both capital-exporting countries, where there is excess wealth to invest, and capital-receiving countries, where investment is sought.

SWFs also bring substantial benefits to the global markets, as long-term investors can ride out shorter-term business cycles in a way that can be extremely beneficial, particularly during periods of financial turmoil or macroeconomic stress.

Sovereign wealth funds fall into two camps with their sources of wealth:

Commodities: exports that are taxed or owned by the government (such as Norway, Kuwait ?)

On-commodities: revenues from the transfer of assets from official foreign exchange reserves (such as China, Singapore?)

 The basic design and operating model of these resource-based funds was to facilitate balancing public expenditures (consumption) with the long-term accumulation of financial assets (savings), so

as to sustain government spending and investment levels long after resources revenues ended. Derived from the permanent income hypothesis, this approach is bounded by the capacity of both the local  economy and local capital markets to absorb large flows of new capital

Part of the issue per the podcast about US was unlike Norway, it does not tax the oil (although it is the largest oil producing country in the world), it subsidises it.  

Following from Visual Capitalist: 

Norway runs the largest globally, thanks to its vast oil and gas production in the North Sea, which generates 10% of the country’s GDP.

In 2024, the fund earned a record $222 billion in profit fueled by strong gains across the tech sector. Last year, Apple, Microsoft, and Nvidia stood as the fund’s top holdings.

Following next in line are China’s two biggest funds, holding $2.4 trillion in assets. In particular, these funds play a key role in financing the Belt and Road Initiative and other strategic industries. Through these funds, billions have been invested in railroads, green energy, and mining projects across Africa. Notably, Chinese investment across the region is 2.5 times greater than Western nations put together.

Ranking in fifth is Saudi Arabia’s Public Investment Fund, with $925 billion in assets. Over the past decade, it has made a $3.5 billion stake in Uber, along with investments in Nintendo and Heathrow Airport. In 2025, the fund plans to invest $1 billion in sports streaming service DAZN.

As to how it has grown, consider the infographic below, from just 4 years ago, 2021:

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One of the interesting top 10 funds is Indonesia with assets of $600 billion. (8th largest). Others being Gulf, Norway, China, Singapore, HK.

Earlier in 2025:

Prabowo signed a document at the presidential palace in Jakarta initiating the new fund known as Daya Anagata Nusantara, or Danantara, which is modelled on Singapore's investment arm Temasek and received approval this month in a parliament dominated by the president's ruling coalition.

"It is not just an investment body, it is an instrument for national development that will optimise the way we manage our wealth. We are committed to being a developed nation."

The government has not specified which state-owned companies will fall under control of the fund but Prabowo has said he wants it to manage more than $900 billion in assets.

Danantara will be Indonesia's second sovereign wealth fund, after the Indonesia Investment Authority which was launched in 2021 and holds $10.5 billion in assets.

The recent establishment of the Indonesian sovereign wealth fund (SWF), Danantara, has sparked controversy due to its funding coming from a large sum of the state budget, freed up by the government’s austerity program. Despite its transformative potential, ongoing entanglements of politics and business risk undermining Danantara’s success.

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Following a couple of interesting points:

a) The report talks about Texas Permanent School Fund (TPSF) established in 1854 (state forefeiture wealth to education, and since through oil and gas)

b) Very few long standing SWF. So the idea of longevity is more a notion/hope and exception than reality. (This goes in direct discussion with Limited Life idea)

c) The idea of SWF in a way is to transform Natural Resources Wealth to Financial Wealth.

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SWF and oil

Many SWF are driven by petrodollars, and the change in oil prices also impacts their fortunes. "Prices hit record highs in 2012 at $109 a barrel – a remarkable rise from $1.82 in 1972 – and after a period of volatility the price is currently back up around $90 a barrel."

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It is a changing world in terms of asset ownership. The tides or sand-dunes of ownership keep shifting over time. In older times, perhaps might was driving ownership by nations/kingdoms. Now it is capital, often fuelled by country's physical resources or trade and development prowess.

So some of the largest companies in the world have SWFs, Pension Funds, Insurance Funds, some of the world's largest Mutual Funds apart from private investors. And then mines in Africa are owned by China SWF. And Heathrow by .... and real estate in India by GIC. Some of these fund large infrastructure projects. A slow shift in world's asset ownership... 

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SWF investments

• Mubadala - Tech Investments
• Largest global companies
• Private Equity, increasing investments
• Emerging Markets
• Sustainable goals (ESG) - slowly opening to these
• In Africa, other places, real estate

And to put the above assumption about SWF investments and asset ownership in context:

Although the total participation of SWFs remains small, the influence of SWFs manifests itself in megadeals, which are transactions valued at more than $5 billion. As such deals are infrequent yet large, there is typically significant media exposure, which amplifies the position of SWFs as major players in global capital markets.

In the period from 2008 to 2019 SWFs joined at least 38 megadeals, such as the China Investment Corporation’s $13 billion acquisition of European logistics company Logicor, the commitments made by the Saudi Public Investment Fund (PIF) and Abu Dhabi’s Mubadala in Japan’s SoftBank Vision Fund ($45 billion and $15 billion, respectively), the participation of ADIA in the large buyout consortia of ThyssenKrupp’s elevators unit ($19 billion) and Nestlé Skin Health ($17 billion) and GIC’s acquisition with Brookfield Infrastructure Partners of US railway firm Genesee & Wyoming ($8.4 billion). Nonetheless, direct SWF involvement in M&A megadeals is still limited. Consider that in 2019 there were 98 deals closed worth at least $5 billion globally (Aliaj et al. 2020). SWFs participated directly in just four of them.

Ultimately, despite the growing number of SWFs and their aggregate assets under management, there are few SWFs among all global financial actors that have the size and transact in sufficient volume to impact markets on a global scale. In this context, we refer specifically to the capacity of certain SWFs to influence market trends, investor preferences, deal terms and pricing structures as a function of their scale, market presence and reputation. Other such actors include major central banks, some international finance institutions, major investment banks, institutional asset managers and large pension funds.

In this regard, then, some SWFs can indeed be as influential as large institutional investors. For instance, the investment practices of Norway’s GPFG, as we show in this chapter, have important signalling effects on the evolution of sustainable investment practices in public equities markets. In a similar way, some SWFs – such as Temasek and GIC – have become influential in private markets, as they participate in direct investment consortia to drive capital to discrete market sectors, such as those related to disruptive technologies.

Much of the current attention on and scrutiny of global equity markets centres on the increasing growth of index funds. These are low-cost passive investment funds that are indexed to a variety of markets and sponsored by three of the largest global investment managers: BlackRock, Vanguard and State Street. Since the turn of the century these three managers have collectively quadrupled their ownership of the US S&P 500 index, with an average aggregate stake of 20 per cent of the holdings of the benchmark (Bebchuk & Hirst 2019). Hence, Blackrock, Vanguard and State Street can wield considerable influence on behalf of their clients by voting on board proposals. Research analysing the proxy voting of these managers demonstrates that they exercise their shareholder rights in a consistent, if not controversial, way by voting most of the time with management. The concentration of shareholder rights in this handful of organizations suggests that they have become systemically important to the functioning of global public equity markets (Fichtner, Heemskerk & Garcia-Bernardo 2017). In this regard, the somewhat smaller holdings of public equities even by the largest SWFs significantly constrain their ability to exert considerable influence over the managements of their investee companies.

Total SWF holdings in listed equities amounted to roughly $3.4 trillion at the end of 2020.4 This represents just 3.6 per cent of total global market capitalization.5 This level of ownership is insufficient to claim that SWFs in the aggregate are systemically important, especially when compared to the largest institutional investment managers.

Nevertheless, individual SWFs can be influential asset owners. The GPFG, managed by Norges Bank Investment Management (NBIM), owns 1.5 per cent of all listed equities globally and more than 2.5 per cent in Europe (some 9,123 companies in total). The GPFG is by law not allowed to own more than 10 per cent of the shares of any single firm, but this does not deter NBIM, on behalf of the GPFG, from exercising ownership rights to influence corporate behaviour. For example, the GPFG has been active in encouraging proxy access rights for US-listed companies, which allow it to nominate candidates to boards of director. The GPFG has also set a precedent by publishing its voting intentions prior to general meetings to raise awareness of its position vis-à-vis other shareholders. Given the visibility of the fund as one of the world’s largest and most transparent, attributable in part to Norway’s liberal-democratic governance, the decisions taken by the fund are scrutinized, challenged and imitated (Vasudeva, Nachum & Say 2018).

The overall objective of the GPFG is to realize long-term value creation while investing sustainably, integrating economic, environmental and social considerations. As such, the GPFG, under the stewardship of the NBIM, has established standards in the way large asset owners approach responsible investing, through the introduction of ethical guidelines (see below for discussion), low-carbon transition strategies, corporate governance guidelines and active corporate engagement strategies to hold responsible top managers and board members of its investee companies. Although the GPFG does not hold seats on portfolio company boards, its engagement strategy has nonetheless been influential in pressuring investee company boards (Aguilera et al. 2021).

On the matter of climate specifically, Norway, as an oil producer, has been criticized for not setting emission targets for the GPFG. Notwithstanding this criticism, in 2019 Norway’s parliament approved a divestment strategy for fossil fuel holdings (including coal, oil and gas) and also committed to redirect a portion of the GPFG’s holdings to unlisted renewable energy infrastructure (NBIM 2021). NBIM became a founding member of the One Planet Sovereign Wealth Funds (OPSWF) initiative, joining ADIA, the KIA, the NZSF, the QIA and the PIF. This initiative, established in 2017, is focused on promoting the integration of climate risk criteria into SWF portfolio strategies and encouraging investments that support transition to a “low” emissions economy. Although the OPSWF’s members themselves may not exert strong and independent influence over the pricing of carbon risk, the OPSWF through its leadership elevates climate change as a critical risk factor in managing institutional capital. We elaborate further on this in the next section.

From here.