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Citi Perspectives for the Public Sector |
2014
23
Over the past decade, Sovereign Wealth
Funds (“SWFs”) have emerged as increasingly
important members of the global investment
community. Although some of the larger
SWFs have been operating for several
decades, these investors only gained
prominence after providing nearly
$100 billion of fresh capital to Western
financial institutions, following the global
financial crisis in 2008.
Broadly defined, today’s SWFs boast nearly $6.5 trillion in assets under
management, exceeding the aggregate assets currently managed by
private equity and hedge funds, and are expected to grow annually by
approximately $500 billion. Approximately 40 SWFs have been formed in
the past decade and nearly 15-20 others are in various stages of formation.
At their core, SWFs are dedicated investment vehicles established
by governments to help diversify their economies away from their
primary sources of foreign exchange reserves, be it commodity-linked
or manufacturing exports. In general, these funds have longer-term
investment horizons as they are not burdened with the need of either
providing annual dividends or funding liabilities. However, this is where the
similarities among SWFs end, although the market has a tendency to refer
to them as monolithic entities.
In this article, we highlight some of the key objectives and attributes of
these institutions, as well as the major areas of their investment focus.
The Emergence of
Sovereign Wealth
Funds as Global
Investors
Zubaid Ahmad
Vice Chairman,
Institutional Clients
Group,
Citi