SOVEREIGN
WEALTH FUND - ECONOMY
News:
The Growth Trajectories
of Sovereign Wealth Funds: Trends, Challenges, and Opportunities
What's
in the news?
●
In the ever-shifting landscape of global
finance, one class of funds has emerged as potent agents of political influence
and guardians of national wealth.
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Enter the world of Sovereign Wealth Funds,
where stories of investment are coupled with insight and intrigue.
Key
takeaways:
●
Twenty years ago, SWFs managed just US$1
trillion in assets, but this figure has since surged more than elevenfold to
reach US$11.36 trillion by the end of 2022.
●
Powerhouse organizations like the Public Investment Fund (PIF) of Saudi
Arabia, the Abu Dhabi Investment Authority (ADIA), and Singapore’s Global
Infrastructure Partners (GIG) are not only players in the global investment
arena – they are architects and masterminds of economic transition on an
unprecedented scale.
Sovereign
Wealth Fund:
●
It is a state-owned investment fund composed of money generated by the government.
●
Mostly derived from a country’s surplus
reserves.
Objective:
●
To allocate funds for the betterment of the country’s economy.
Investments:
●
It is used to invest in capital assets
(such as real estate, metals, stocks, and bonds), private equity funds and
hedge funds.
Sources
of Funds:
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Balance of payments surplus
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Official foreign currency operations
●
Proceeds of privatizations
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Governmental transfer payments
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Fiscal surplus
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Receipts resulting from resource exports
Go
back to basics;
National
Infrastructure and Investment Fund (NIIF):
●
India’s 1st ever SWF (infrastructure specific investment fund)
Objective:
●
To maximize economic impact mainly through
infrastructure investment in commercially viable projects, both Greenfield and
Brownfield.
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Set up in December 2015 as a Category-II Alternative Investment Fund.
Components:
●
Master
Fund: Invests in core infrastructure sectors such as roads,
ports, airports, power etc.
●
Fund
of Funds: Invests in Green Infrastructure, Mid-Income &
Affordable Housing, Infrastructure services and allied sectors.
●
Strategic
Fund: Invests largely in equity and equity-linked
instruments.