Sovereign wealth fund

As sovereign wealth funds are funds designated, the capital on behalf of a State to create and manage .

Today the term is mostly equated with the American name Sovereign Wealth Fund (SWF) coined by Andrew Rozanov in 2005 . However, a generally accepted definition has not yet been found. It is therefore not always possible to clearly determine whether asset management by a state is to be regarded as a sovereign wealth fund or whether it is to be distinguished as a pension fund or a state enterprise .

Differentiation from state pension funds

Whether state funded pension schemes , such as the Japanese Government Pension Investment Fund (GPIF) and the California Public Employees' Retirement System (CalPERS), which are intended to guarantee the pension entitlements and future pension payments of civil servants or state employees through income from a capital stock , are viewed as state funds should be is controversial in the literature. In contrast to the other funds, there are specific beneficiaries (pensioners) and not the state as the sole beneficiary representing the general public.

The world's largest government fund, the United States' Social Security Trust Fund , is generally not considered a sovereign wealth fund. The state pension fund in Norway , on the other hand, is largely counted among the state funds, since 2006 the administration of social security funds was merged with the administration of the income from oil production.

Economical meaning

In 2012, States considered funds worth almost 4.5 trillion US dollars . At least 30 new sovereign wealth funds were added between 2005 and 2015. According to the Sovereign Wealth Fund Institute , the assets of sovereign wealth funds were already 7.3 trillion US dollars in mid-2016 .

With this high investment volume, sovereign wealth funds have become important players in the financial markets. The Norwegian Statens pensjonsfond held around 60% of its assets in shares in 2016 . His stake in more than 9,000 companies in 75 countries at the time represented more than 1% of all stocks in the world. In Germany, the participation of a foreign sovereign wealth fund first attracted public attention when the emirate of Kuwait took a stake in what is now Daimler AG with its sovereign wealth fund Kuwait Investment Authority in 1974 . At the end of 2016, the share was around 6.8% of the share capital .

In addition, sovereign wealth funds also hold government bonds to a large extent. The Chinese government held in 2007, a large part of its foreign exchange surpluses of the past $ 1.5 trillion in fixed income US government bonds . It can be assumed that he also holds European government bonds, with Germany likely to make up a proportion corresponding to its economic strength.

Reasons for the formation of sovereign wealth funds

States set up such funds for the following reasons and in accordance with the following interests:

• Eliminating variations in prices of raw materials : To high revenues from commodities - sales in times of high prices to apply to in times of low prices for the commodities exported the missing inflow of funds by drawing on the created reserves to compensate. One example is the Copper SF Chile with US $ 3.9 billion investment amount (2007) to compensate for copper - price fluctuations . Another example is Russia's Stabilization Fund .
• Protection of the national economy from inflation : When the income from the sale of raw materials is so great that this money can no longer be spent sensibly and / or not without damage to the national economy . For example, Norway's oil and gas revenues are so large that if they were completely spent, extreme inflation would result.
• Formation of reserves for the time after raw material stocks are exhausted : If a state is highly dependent on the income from raw material sales, but the raw material reserves are foreseeably running out, income from these sales is invested in other branches of industry in order to generate them Income to support the state budget in the future . One example is the Kuwait Future Generations Fund of the Kuwait Investment Authority . There are similar funds in other oil-exporting countries.
• Investment of foreign exchange surpluses : If an economy strongly influenced by the state, such as B. China's high foreign exchange - surpluses achieved to this to create profitable.
• Power political goals : The establishment of the Saudi Public Investment Fund (PIF) serves to link the foreseeable necessary economic transformation of Saudi Arabia with the consolidation of power by the Crown Prince and the skimming of income from the country's feudal elite.
• Strategic development goals : To make strategic investments, e.g. B. in raw material deposits in foreign countries, in branches of industry and technologies classified as promising, in armaments factories in foreign countries, etc. Often the functions of raw material and development funds are linked.
• Special tasks : To perform a specific task or tasks with a separate body of assets. In this respect, z. For example, the Kreditanstalt für Wiederaufbau (Reconstruction Loan Corporation) formed by Germany from the funds provided by the Marshall Plan can be viewed as a state fund that grants cheap loans for purposes considered worthy of support. On the one hand, the fund money is invested and increased through these loans and, on the other hand, it supports certain political goals such as business start-ups or measures to save energy .
• Unconditional permanent income for the citizens : To allow the population to participate in the raw material wealth of their country permanently on the one hand immediately and permanently, on the other hand through permanent investment of part of the raw material income and a permanent distribution of part of the income of the fund to the citizens. The only example of this is the Alaska Permanent Fund .

Sovereign wealth fund

The fifty largest single funds are:

Country	Funds	Net worth 2018 (billion  US dollars )	Net worth 2012 (billion  US dollars )	founding	revenue
Norway	Statens Pensjonsfond Utland or Government Pension Fund Global (GPFG)	1,035	654	1990	oil
People's Republic of China	China Investment Corporation (CIC)	941	482	2007
United Arab Emirates , ( Abu Dhabi )	Abu Dhabi Investment Authority (ADIA)	683	450	1976	oil
Kuwait	Kuwait Investment Authority	592	290	1953	oil
Saudi Arabia	SAMA Foreign Holdings	494	578	2008	oil
Hong Kong	Hong Kong Monetary Authority Investment Portfolio	457	497	1993
People's Republic of China	SAFE Investment Company	441	324	1978
Singapore	Government of Singapore Investment Corporation Pte Ltd (GIC)	390	260	1981
Singapore	Temasek Holdings	375	158	1974
Qatar	Qatar Investment Authority (QIA)	320	135	2005	mineral oil and natural gas
People's Republic of China	National Social Security Fund	295	136	2000
Saudi Arabia	Public Investment Fund (PIF)	250	004th	2008	oil
United Arab Emirates , ( Dubai )	Investment Corporation of Dubai (ICD)	230	070	2006
South Korea	Korea Investment Corporation (KIC)	134	043	2005
United Arab Emirates , ( Abu Dhabi )	Mubadala Investment Company	125	048	2002	oil
United Arab Emirates , ( Abu Dhabi )	Abu Dhabi Investment Council (ADIC)	123	010	2007	oil
Australia	Australian Government Future Fund	105	077	2006
Iran	National Development Fund of Iran (NDFI)	091		2011	mineral oil and natural gas
Russia	Stabilization fund	066	086	2008	oil
Libya	Libyan Investment Authority (LIA)	066	063	2006	oil
United States , ( Alaska )	Alaska Permanent Fund	062	042	1976	oil
Kazakhstan	Samruk-Kazyna JSC	061	078	2008
Kazakhstan	Kazakhstan National Fund	058	042	2000	oil
Brunei	Brunei Investment Authority	040	039	1983	oil
Turkey	Turkey Wealth Fund	040		2016
Malaysia	Khazanah Nasional BHD	039	022nd	1993
United States , ( Texas )	Texas Permanent School Fund	038	027	1854	oil
United Arab Emirates	Emirates Investment Authority	037	010	2007	oil
Azerbaijan	State Oil Fund of Azerbaijan (SOFAZ)	033	033	1999	oil
New Zealand	New Zealand Superannuation Fund	029	020th	2001
Germany	Fund to finance nuclear waste management	029		2017	Atomic energy
United States , ( New Mexico )	New Mexico State Investment Council	020th	015th	1958	mineral oil and natural gas
Oman	State General Reserve Fund	018th	008th	1980	mineral oil and natural gas
United States , ( Texas )	Permanent University Fund	017th		1876	mineral oil and natural gas
East Timor	Timor-Leste Petrolium Fund	017th	011	2005	mineral oil and natural gas
Russia	Reserve Fund	016		2008	oil
Chile	Social and Economic Stabilization Fund	015th		2007	copper
Canada	Alberta Heritage Savings Trust Fund	013		1976	oil
Russia	Russian Direct Investment Fund	013		2011
Bahrain	Mumtalakat Holding Company	011		2006
Ireland	Ireland Strategic Investment Fund (ISIF)	009		2014
Peru	Fondo de Estabilización Fiscal (FEF)	008th		1999
Algeria	Revenue Regulation Fund	008th	057	2000	mineral oil and natural gas
United States , ( Wyoming )	Permanent Wyoming Mineral Trust Fund	007th	006th	1974	Mining
Brazil	Sovereign Fund of Brazil	007th		2008
Mexico	Fondo para la Estabilización de los Ingresos Petroleros (FEIP)	006th	002	2000	oil
Oman	Oman Investment Fund	006th		2006	oil
Botswana	Pula Fund	006th		1994	Diamonds
Trinidad and Tobago	Heritage and Stabilization Fund	006th		2000	oil
People's Republic of China	China-Africa Development Fund	005		2007
Angola	Fundo Soberano de Angola	005		2012	oil

regulation

In some legal systems, the hostile takeover of companies in certain economic sectors by foreign investors is subject to approval or is prohibited. Typical areas that are prohibited or subject to approval are the armaments industry , mass media , telecommunications and energy supply .

The USA is an example of a country with strict regulations. Their Committee on Foreign Investment in the United States , (CFIUS), regularly reviews investments by foreign investors to determine whether state security is affected. It is even possible to cancel contracts afterwards.

In Germany, in response to the debate on sovereign wealth funds, the amendment to the Foreign Trade Act and the Foreign Trade Ordinance came into force in April 2009 . The Federal Ministry of Economics and Technology can now prohibit foreign investors, and thus also foreign state funds, from taking part under certain conditions if they want to acquire more than 25% of the shares in a company based in Germany. However, this form of regulation is not without its problems. In particular, there is the question of compatibility with the European free movement of capital from Article 63 of the Treaty on the Functioning of the European Union (TFEU). Because this freedom of movement is the only one in the TFEU, even according to its wording, also applies to third countries, i. H. Non-EU members.

Others

Norway: Restricted to ethically correct investments

In addition to a constant discussion about spending a larger share of oil and gas revenues immediately instead of investing them in the long term, there is also a constant public debate in Norway about the ethical aspects according to which investments should be made. Norway, which, according to the anti-corruption organization Transparency International, is almost free of corruption, sets high standards here. To this end, an ethics advisory board has been set up, which can propose that companies and branches of the economy not be considered in the investment strategy of the Statens pensjonsfond . The Ministry of Finance usually follows this advice. The recommendations and decisions are published on the website of the Ministry of Finance .

organization

In November 2007, more than 20 states that operate one or more sovereign wealth funds met for the first time. Half a year later, in May 2008, the group gave itself an organizational structure and a name: International Working Group (IWG) of Sovereign Wealth Funds. The aim of the group was the exchange of experiences and the common representation of interests, especially vis-à-vis the recipient countries of their investments, which at that time were planning investment restrictions on sovereign wealth funds in many parts of the world. The group, which still has 23 members, has now been renamed the International Forum of Sovereign Wealth Funds (IFSWF). It meets regularly. The 2011 annual meeting took place in Beijing.

Ecological state fund

At the UN Climate Change Conference in Katowice 2018, the climate scientist Hans Joachim Schellnhuber , the political scientist Claus Leggewie and the economist David Löw Beer proposed the establishment of a state fund as a market-based instrument for climate protection with a volume of up to EUR 0.6 trillion should be the setting of a clear signal in the direction of a sustainability transformation. This “future fund ” is to be fed from CO ₂ pricing and - for the purpose of pricing also the accumulated historical greenhouse gas emissions - from a higher inheritance tax . Funds would either flow directly into infrastructure projects or into the sovereign wealth fund, which invests in companies with benefits for climate protection and the energy transition according to defined criteria .

See also

• Pension fund
• State company

literature

• Stephan Kaufmann: Investors as invaders: State funds and the new competition for power on the world market . Dietz, Berlin 2008, ISBN 3-320-02158-3 .
• Mario Martini : Visiting friends? - State funds as a challenge to European and international law , DÖV 2008, pp. 314–322.
• Janusz Piekałkiewicz : World history of espionage , p. 327 f., ISBN 3-933366-31-3 ; to point 7 strategic investments
• Frank Stocker: State money dominates the financial markets , in Die Welt , June 27, 2007, p. 9
• Johanna Wolff: Foreign State Funds and State Special Rights: On the phenomenon of "Sovereign Wealth Funds" and on the compatibility of the restriction of company investments with European law . Diss., Berliner Wissenschaftsverlag, Berlin 2009, ISBN 3-8305-1688-6 .

Web links

Wiktionary: State funds  - explanations of meanings, word origins, synonyms, translations

• Foreign exchange reserves end up in investment funds, Rainer Sommer, May 1, 2007, Telepolis
• DIE ZEIT, July 12, 2007 No. 29, With the power of twelve trillion dollars
• www.swfinstitute.org Institute for State Funds
• Legal Tribune Online for the annual meeting of the International Forum of Sovereign Wealth Funds (IFSWF) in Beijing in May 2011

Individual evidence

1. ↑ cf. Maximilian M. Preisser: Sovereign wealth funds: Development of a comprehensive concept for the regulation of sovereign wealth funds . Mohr Siebeck, 2013, ISBN 978-3-16-152210-9 , pp. 23 . ( limited preview in Google Book search)
   
2. ↑ Ashby Monk: Is CalPERS a Sovereign Wealth Fund? . Via: Center for Retirement Research at Boston College , accessed May 12, 2017
3. ↑ On a shopping spree: sovereign wealth funds hijack the whole world . In: Handelsblatt , January 16, 2013, accessed on May 12, 2017.
4. ^ State funds: Gigantic mountains of money . In: Focus Money , June 11, 2014, accessed May 13, 2017.
5. ↑ ^{a b} Gabriel Knupfer: These are the largest sovereign wealth funds in the world . In: Handelszeitung , May 13, 2015, accessed on May 13, 2013.
6. ↑ Shareholder structure . On the website of Daimler AG , accessed on May 12, 2017.
7. ↑ Guardian of the Treasure , In: Der Tagesspiegel , May 28, 2007, accessed on May 13, 2017.
8. ^ Stephan Roll: A state fund for the prince: Economic reforms and securing power in Saudi Arabia. SWP Study 2019 / S 13, June 2019, doi: 10.18449 / 2019S13
9. ↑ Souvereign Wealth Fund Rankings on the Souvereign Wealth Fund Institute website , as of May 2017
10. ↑ Sovereign wealth funds 2012 , Ranking of the ESADEgeo-Center for Global Economy and Geopolitics , as of May 2012
11. ↑ ANNUAL REPORT FUND FOR THE FINANCING OF NUCLEAR DISPOSAL 2017. FUND FOR THE FINANCING OF NUCLEAR DISPOSAL, BERLIN, December 31, 2017, accessed on December 2, 2018 . 
12. ↑ Overview by Johanna Wolff: Foreign State Funds and State Special Rights - On the Phenomenon "Sovereign Wealth Funds" and the Compatibility of the Restriction of Company Participations with European Law , Diss., Berlin 2009, pp. 118 ff.
13. ↑ To this in detail Johanna Wolff: Foreign State Funds and State Special Rights - On the Phenomenon "Sovereign Wealth Funds" and on the Compatibility of the Restriction of Company Participations with European Law , Diss., Berlin 2009.
14. ↑ Companies Excluded from the Investment Universe ( Memento of the original dated November 12, 2012 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. Norwegian Ministry of Finance, accessed November 6, 2012 
15. ↑ International Forum of Sovereign Wealth Funds (IFSWF)
16. ^ R. Bollmann: Conference in Katowice: Radical Plan for the Climate. In: FAZ.net. December 1, 2018. Original article: David Löw Beer, Hans-Joachim Schellnhuber, Claus Leggewie: Future Fund - An instrument for the climate-friendly design of infrastructure and companies. IASS Policy Brief 4/2018 ( online )

Please note the information on legal issues!