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Sovereign Wealth Fund
Sovereign Wealth Fund
3
Defining SWFs
4
Defining SWFs
5
Types of SWF
USD 1.4 tn~USD2 tn, or 70% of total SWF asset holdings are in
the hands of resource-rich countries, such as UAE and Norway
Focus:
– Maintain economic stability against commodity price fluctuation
– Ensure future generations may not be disadvantaged by the
exploitation of natural resources by current generation
U.S. Euro area Japan Emerging Asia Oil exporters
% of global GDP
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
Focus
– Generate higher returns than local sterilization bond cost
Global Foreign Exchange Reserves
USD billion
6,000
5,000
4,000
3,000
2,000
Rest of World
1,000 Asia
0
1995 1997 1999 2001 2003 2005 2007
Third Group: Pension Reserve Funds
Preserve and Enhance Wealth for the Future
Generations
– Advanced countries have set aside a portion of their
pension funds and manage them separately to prepare for
the aging society
– Pension funds of New Zealand, France & Ireland manage
about USD 81bn, or 2.8%~4.1% of global SWF market.
Focus
– Generate higher return from an active asset allocation and
a long-term management
⇒ expand investment horizon to 20~30 years
Percent of population aged 65 and over
30
Developing w orld
25
Developed w orld
20
15
10
0
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Benefits of SWFs
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For international financial markets,
• Help recycle current account surpluses, and enhance market liquidity (this is
of some importance currently due to global financial stress);
• Permit more diversified partnership with other players such as private equity
and hedge funds, permitting better risk management
• They now compete with Central Banks, hedge funds, private equity as the
international capital providers of last resort.
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Concerns
Transparency & Accountability
SWF can play a vital role in securing our future energy needs
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