Definition
Sovereign Wealth Fund
A sovereign wealth fund is a state-owned investment fund that deploys a country's surplus reserves or resource revenues into global assets to earn long-term returns.
Countries with large surpluses, such as Norway (oil), Singapore (GIC, Temasek) and Gulf states, run sovereign wealth funds that invest in equities, bonds, infrastructure and private assets worldwide. They are major global investors.
India hosts SWF capital, the National Investment and Infrastructure Fund (NIIF) attracts such funds, and offers tax incentives to draw their investment into infrastructure. India does not run a large traditional SWF itself, as it lacks big commodity surpluses.
Related terms
- Forex ReservesForex reserves are the foreign-currency assets and gold the RBI holds to manage the rupee, pay for imports and meet external obligations during stress.
- FDI vs FPIFDI is long-term foreign investment in physical businesses and assets, while FPI is shorter-term foreign money invested in stocks and bonds.
- Frontier MarketsFrontier markets are the smallest and least developed investable economies, riskier and less liquid than emerging markets, examples include Vietnam, Bangladesh and Nigeria.
- Reserve CurrencyA reserve currency is one that central banks hold in large quantities as foreign-exchange reserves and that dominates global trade and finance; the US dollar is the leading example.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.