Funds: Private Equity, Hedge and All Core Structures

Chapter 9

Sovereign Wealth Funds, State-sponsored Funds, Pension and Superannuation Schemes and Charities

9.1 INTRODUCTION

This chapter describes a sample of the various funds created and operated by the state either alone or in conjunction with the private sector. These funds are enormous investors in direct fund (and indeed fund of funds) managers’ sponsored funds. With the exception of some of the sovereign wealth funds, most funds are operated exclusively in the public interest and so are frequently subjected to public and state review and scrutiny. Many of the state pension systems are vast in scale, in terms of assets managed or distributed and the number of people served by the schemes. Private pension funds are among the largest investors by asset value and play a key role in various markets. They are all significant operators in the global investment scene and for most fund managers they are likely to be investors with specific demands and restrictions.

9.2 SOVEREIGN WEALTH FUNDS (SWFS)

9.2.1 Definition of sovereign wealth fund

An SWF is a special purpose investment fund or arrangement owned and managed (directly or indirectly) by a government, created for macroeconomic purposes. An SWF is commonly established out of balance of payments surpluses, Official foreign currency operations, the proceeds of privatizations, fiscal surpluses and/or receipts resulting from commodity exports. SWFs are created to hold, manage or administer assets to achieve financial objectives.