Asset management and funds
Sovereign wealth fund (SWF)
A state-owned investment fund, often built from oil revenues or reserves.
Last reviewedWhat does Sovereign wealth fund (SWF) mean?
A sovereign wealth fund is an investment fund owned by a government. It is usually funded by commodity revenues such as oil and gas, by foreign exchange reserves or by budget surpluses. It invests for the long term to save wealth for future generations, steady the budget or develop the home economy. Examples include Norway's Government Pension Fund Global, the Abu Dhabi Investment Authority (ADIA), Saudi Arabia's Public Investment Fund (PIF), the Qatar Investment Authority, and Singapore's GIC and Temasek. Some, like PIF, also build new domestic industries as part of a national plan. Example: a fund of 500 billion that spends 3 percent of its value a year gives the budget 15 billion. The Santiago Principles, agreed in 2008 and overseen by the International Forum of Sovereign Wealth Funds, set voluntary standards for how these funds are governed.
Where does it come up in case interview prep?
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- Asset and wealth management: players, trends, regulation, and how to crack the casesLesson in Asset and wealth management
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Related terms
- Assets under management (AUM)The total market value of the money a firm manages for clients.
- IRR (internal rate of return)The discount rate at which NPV is exactly zero.
- Limited partner (LP)An investor that puts money into a private equity or venture fund.
- Opportunity costThe value of the best option you give up.
- Net flows (net new money)New client money coming in minus money taken out.
- Active versus passive investingTrying to beat the market versus simply tracking it at low cost.
- General partner (GP)The firm that raises and runs a private equity or venture fund.
- Carried interest (carry)The general partner's share of a fund's profits, usually 20 percent.