Glossary - Sovereign Wealth Fund
A Sovereign Wealth Fund (SWF) is a state-owned investment fund or entity that is commonly established from revenue generated by the government, often derived from a country's surplus reserves. SWFs aim to invest in a variety of financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds. Sovereign Wealth Funds invest globally to achieve financial returns and diversify the country's income sources.
Also known as
- State Investment Fund
- National Wealth Fund
Use cases examples
- Annual Report of a Sovereign Wealth Fund: The fund's strategic allocation to global equities resulted in a 5% return on investment for the fiscal year.
- Investment Policy Statement: The Sovereign Wealth Fund seeks to commit up to 20% of its portfolio to alternative investment strategies, focusing on infrastructure and private equity ventures.
Considerations for investors
- Venture capital firms and family offices should assess the geopolitical risk and ethical considerations when co-investing with SWFs.
- They should also evaluate the competitive dynamics of investing alongside state-backed entities, which might have different return objectives and risk appetites.
Considerations for founders
- Founders should be aware that partnering with SWFs could mean navigating complex political and regulatory landscapes.
- They should also consider the long-term investment horizon typically associated with SWFs, which may align with the growth strategy of the company.
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