Sovereign Wealth Update: Number of funds and assets continue to grow.

Author:Wolf, Greg
Position:International Trade

State-sponsored investment funds, better known as sovereign wealth funds, continue to rise in economic clout as the number of these funds grows along with the assets they manage. While these government-controlled investment vehicles vary considerably in 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 either from excess foreign currency reserves earned through exports or from income derived from commodity sales such as oil and gas. China's sovereign funds would be an example of the former, while Norway's would be an example of the latter. Generally speaking, Asian funds arose from export earnings while Middle Eastern, European, and American funds arose from commodity earnings. Most of these funds invest globally. Some of them dedicate a certain percentage of their portfolio for investment in their own countries.

According to the Sovereign Wealth Fund Institute, there are now seventy-nine sovereign funds. The value of their holdings is estimated to be $7.5 trillion as of December 2017. These holdings encompass a wide variety of financial assets including stocks, bonds, real estate, precious metals, and other investable assets. They also include so-called "alternative investments" managed by hedge funds, private equity, and venture capital funds.

Alaska is Largest US Sovereign Fund

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 United States. With assets of approximately $61 billion, the Alaska Permanent Fund currently ranks 21st among the world's funds, ranking just below Libya ($66 billion) and just above Kazakhstan ($60 billion). By contrast, at $999 billion, Norway's Government Pension Fund Global is the world's largest fund and is widely expected to become the first trillion dollar fund, having touched that milestone briefly during 2017.

In addition to Norway, other countries with very large funds include China, the United Arab Emirates, Kuwait, Saudi Arabia, Hong Kong, and Singapore.

As noted, Alaska is home to America's largest single fund at just over $60 billion. However, Texas has two sizable funds--the Texas Permanent School Fund ($37 billion) and the Permanent University Fund ($17 billion). Taken...

To continue reading