Sovereign wealth funds expansion: global investments include Alaska assets.

• Author: Wolf, Greg
• Position: SPECIAL SECTION: International Trade

The rise of the world's sovereign wealth funds continues as more funds come into existence and the assets they hold grow as well. While these government-controlled investment vehicles vary considerably size and scope, as well as by their particular investment strategies and policies, they are a significant force in the financial markets, and their impact can be felt in all corners of the world, including Alaska.

Typically, the source of the capital for these funds originates from excess foreign currency reserves earned through exports or from income derived from commodities such as oil and gas. China's sovereign funds would be an example of the former, while Norway's would an example of the latter. By and large, Asian funds arose from export earnings while Middle Eastern, European, and American funds arose from commodity earnings. Most of the funds invest globally. Some funds dedicate a certain percentage of their portfolio for investment in their own countries.

$7.4 Trillion Value

According to the Sovereign Wealth Institute, there are now seventy-six sovereign funds. The value of their holdings is estimated to be $7.4 trillion as of June 2016. These holdings encompass a wide variety of financial assets including stocks, bonds, real estate, precious metals, and other investable instruments, They also include so-called "alternative investments" managed by hedge funds, private equity, and venture capital funds.

Of the established funds, 20 percent of them are quite new, coming into existence between 2010 and 2015. The latest wave of entrants into the sovereign wealth arena include a number of funds from African nations, including Senegal, Nigeria, Angola, and Ghana. An American state also is among the new entrants: the West Virginia Future Fund was established in 2014 as a vehicle to invest a portion of the state's oil and gas severance tax revenue.

While Alaska was not the first American state to establish a sovereign wealth fund--that distinction belongs to Texas--it is home to the largest fund in the Unites States. With assets of approximately $54 billion, the Alaska Permanent Fund currently ranks 25th among the world's funds, ranking just below Iran ($62 billion) and just above Algeria ($50 billion). By contrast, at $885 billion, Norway's Government Pension Fund Global is the world's largest fund and is widely expected to become the world's first trillion dollar fund.

In addition to Norway, other nations with very large funds include...