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Top 10 Sovereign Wealth Funds

As the notoriously private wealth vehicles gain increased visibility, especially with their emerging markets investment push, Gulf Business lists the top 10 SWFs in the world.

By Gulf Business | Analysis | Published: 3rd September 2012 at 15:30

Amid the Eurozone debt crisis and a global liquidity crunch, sovereign wealth funds (SWFs) have emerged as vital forefront players in the international financial market. With squeezed funding options, investors the world over are keen to tap into the liquid power of SWFs.

According to the SWF Institute, total SWF assets rose 9.6 per cent year-on-year in 2011, from $4.4 trillion in December 2010 to $4.8 trillion in December 2011, while the total global SWF pile is expected to swell to $30 trillion within the next 20 years.

Fabio Scacciavillani, chief economist at Oman Investment Fund, the Sultanate's SWF, told Gulf Business: "Before the great crisis, SWFs used to stir a bout of economic patriotism, particularly when they acquired large stakes in banks or corporations that governments deemed "strategic". Today these hostile reactions are a distant memory."

"SWFs are increasingly filling a void in the financial markets and are providing capital to very important parts of the economy where much growth will come over the next 10 to 20 years, such as infrastructure," added Scacciavillani, former DIFC economist and author of The New Economics Of Sovereign Wealth Funds.

In a tectonic shift, reflective of wider global economic and political dynamics, emerging markets hold the bulk of SWF funds.

"Emerging economies hold an impressive 81 per cent of government FX reserves, reflecting two decades of soaring current account surpluses and strong capital inflows. This wealth is now increasingly being deployed across the world through SWFs," said Scacciavillani.

Click here for the top 10 SWFs in the world

Gulf Business brings you the top ten SWFs ranked on asset size as estimated by the SWF Institute in July 2012. 

1. Abu Dhabi Investment Authority, UAE ($627 billion)

Established in 1976, the Abu Dhabi Investment Authority (ADIA) currently handles an estimated $627 billion worth of funds. The fund's largest investments are in North America, however, ADIA plans to shift its focus to emerging markets. The fund even brought in private equity firm AXA's chief operating officer Christophe Florin in May this year to head its emerging markets private equity team.

Currently ADIA counts Citigroup bonds and a stake in Britain's Gatwick Airport among its investments.

2. Government Pension Fund – Global, Norway ($593 billion)

Estimated to hold funds worth around $593 billion, up 5.8 per cent from February 2012, the Government Pension Fund-Global holds the surplus wealth produced by Norwegian petroleum income.

While more than half of the fund's assets have been invested in Europe, the SWF recently announced that it plans to increase its geographical spread, and invest more heavily in emerging equity markets.

"The global economic and financial centres of gravity are changing and this will be reflected in the Fund's investments," the SWF said in a statement.

3. SAFE Investment Company, China ($567.9 billion)

The State Administration of Foreign Exchange (SAFE) is responsible for managing China's foreign exchange reserves. The fund, estimated to hold funds worth $567.9 billion, has invested heavily in the UK Equity Market to date.

The fund's top holdings include Royal Dutch Shell, Rio Tinto, Tesco and Barclays.

4. SAMA Foreign Holdings, Saudi Arabia ($532.8 billion)

Controlled by the Saudi Arabian Monetary Agency (SAMA), SAMA Foreign Holdings holds $532.8 billion in assets, up 12.7 per cent from $472.5 billion in February 2012. The fund focuses on low-risk fixed income investments.

The fund is extremely secretive regarding its investments and strategies.

5. China Investment Corporation, China ($482 billion)

Established in 2007, the China Investment Corporation (CIC) is responsible for managing part of China's foreign exchange reserves. The fund, which has seen its assets increase 17.6 per cent from around $409.6 billion (as of February 2012) to approximately $482 billion, invests across the world in equity, fixed income, and alternative assets.

In June this year, CIC signed an MoU with Russian Direct Investment Fund (RDIF) to establish a Russia-China Investment Fund.

The new fund aims to raise $2-4 billion, with $1 billion committed by CIC and its related parties, and another $1 billion by RDIF. The fund hopes to raise an additional $1-2 billion from third-party international investors.

6. Kuwait Investment Authority, Kuwait ($296 billion)

The Kuwait Investment Authority (KIA) is one of the oldest SWFs, established in 1953, and manages the General Reserve Fund and the assets of the Future Generations Fund on behalf of the state of Kuwait.

In June this year, KIA, announced a $500 million investment in the Russian Direct Investment Fund.

Earlier this year, the fund became the second from the Middle East – after ADIA ¬– to receive the status of a Qualified Foreign Institutional Investor (QFII) in China's capital market.

7. Hong Kong Monetary Authority Investment, Hong Kong ($293.3 billion)

In April 1993, the Hong Kong Monetary Authority (HKMA) was created after the merger of the Office of the Exchange Fund and the Office of the Commissioner of Banking.

The HKMA now manages the Exchange Fund, estimated to hold assets of around $293.3 billion.

The Exchange Fund aims to affect, either directly or indirectly, the exchange value of the currency of Hong Kong and invests primarily in its local exchange, the Hang Seng.

8. Government of Singapore Investment Corporation, Singapore ($247.5 billion)

With a portfolio of approximately $247.5 billion, the Government of Singapore Investment Corporation (GIC) does not own the funds, but manages them on behalf of its clients: the Government of Singapore and the Monetary Authority of Singapore.

GIC is wholly owned by the Government of Singapore and has three major sovereign wealth enterprises: GIC Asset Management, GIC Real Estate, and GIC Special Investments.

The fund invests in a diverse range of assets – from equities to real estate to natural resources - in over 40 countries.

9. Temasek Holdings, Singapore ($157.5 billion)

The Asian sovereign wealth fund is headquartered in Singapore and employs over 400 people across the world. Its portfolio stands at around $157.5 billion, comprising mostly of equities.

Asian investments account for over 70 per cent of the fund's exposure, including 30 per cent in Singapore alone. Its investments in North America, Europe, Australia and New Zealand stand at 25 per cent, Temasek said in its 2012 review.

The fund has invested almost $112 billion in the last 10 years.

10. National Welfare Fund, Russia ($149.7 billion)

Established in 2008, the National Welfare Fund consists of two units – the National Wealth Fund and the Reserve Fund – with combined assets of around $149.7 billion.

The Reserve Fund is a part of the federal budget assets and aims to ensure financing of government budget expenses should oil and gas budget revenues decline.

The National Wealth Fund supports the pension system of the Russian Federation. This fund is permitted to invest in riskier assets, such as corporate bonds and equities.

Source: July 2012 estimates, Sovereign Wealth Institute

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