What is a sovereign wealth fund?
A sovereign wealth fund is a state-owned pool of assets, usually built from resource revenue or trade surpluses, held and invested for the long term rather than spent in the year it arrives.
The plain definition
A sovereign wealth fund (SWF) is an investment fund owned by a government. It is funded from a surplus the state would otherwise spend: oil and gas royalties most often, but also mineral revenue, foreign-exchange reserves, privatisation proceeds or land sales. The fund invests that money, at home or abroad, and the state draws on the returns over decades.
What separates it from a pension plan is the source. A pension fund holds contributions owed back to members. A sovereign fund holds the public's own windfall, with no liability attached, which is why the rules about spending it matter so much.
Why they exist
Resource revenue is lumpy and finite. Oil prices swing, deposits run out, and a government that spends every royalty in the year it arrives builds its budget on something that will one day stop. A fund converts a temporary stream into a permanent asset: the barrel is sold once, but the capital it became earns forever.
The second reason is political. Money that sits in a general budget gets spent on whatever is urgent this year. Money that sits in a fund with a published rule gets spent on what the rule allows. The fund is a commitment device as much as an investment vehicle.
What they hold
The large ones hold a global portfolio: listed equities, bonds, real estate, infrastructure, private companies. Norway's holds a share of most listed companies on earth and keeps a few per cent in unlisted real estate, office buildings in London, Paris and New York among them. The Gulf funds hold ports, airports, football clubs and data centres. Singapore's hold a large part of the domestic economy.
Underneath the diversity, nearly all of them began as a claim on energy and property rights: petroleum under the ground, or land and ports above it. The assets they bought later were paid for by the assets they started with.
What is and is not a sovereign wealth fund
Central-bank reserves are not one; they exist to defend a currency, not to compound. A public pension manager such as CPP Investments is not one in the strict sense, because its assets are owed to contributors. A state-owned company is not one, though a fund may own several.
The test is simple: public money, no matching liability, invested for the long term under rules the government of the day cannot quietly change. Canada's Wealth Sovereign Fund borrows the structure and the discipline without being a government body: it is a private initiative, sponsored by Semple Ventures, and says so.
Canada's Wealth Sovereign Fund is an initiative of Semple Ventures. Nothing on this page is an offer to sell or a solicitation to buy securities, nor investment, legal or tax advice. Figures are matters of public record and may have moved since this page was written.