Sovereign wealth funds are investment funds owned by governments of sovereign states and funded by foreign exchange and reserve assets. They are generally funded by revenues accrued from the export of non-renewable natural resources, usually oil and other hydrocarbons taxed or owned by the government, or by transfers of reserves held by countries running current account and budgetary surpluses.
Sovereign wealth funds can be categorized by their longer-term investment horizons as well as their different objectives and, in general, lack of liabilities that need to be met, unlike pension funds. This allows them to take not only signiﬁcant stakes in the funds and the securities they invest in, but also a long-term outlook when making an allocation. In fact, sovereign wealth funding can be the ‘stickiest’ of all institutional investors as they seek returns over long periods and do not divest in times of crisis.*
African Sovereign Wealth Funds
In Sub-Saharan Africa, Nigeria has the 3rd largest Sovereign Wealth Fund with $1bn on an equity base ranking. However, late last year the Financial Times reported that Nigeria’s was the most advanced. Presently, it has allocated $50m to UBS to invest in US Treasuries and $150m to Credit Suisse and Goldman Sachs to build a US corporate bond portfolio. The fund is also investing and saving money locally too.
Norway’s Government Pension Fund Global, popularly known as the Norway Oil Fund, is the largest sovereign wealth fund in the world at $850 billion.