Sovereign Wealth Funds

Sovereign wealth funds are not like traditional institutional investors.

Unlike pension funds, sovereign wealth funds do not have liability obligations and are not subject to the level and frequency of withdrawals typically seen from investors.

What this means for the fund manager (and his marketers) is that this potential investor has large sums of capital available, a long investment horizon and is usually free to make alternative investments that push the risk envelope.

Largest Sovereign Wealth Funds and their current activity in hedge funds

Rank SWF name Country Year Est. Investing in hedge funds? Total Assets ($ mn)
1 Abu Dhabi Investment Authority UAE 1976 Yes 625,000
2 Government Pension Fund – Global Norway 2006 Not yet –  although HF are a longer term consideration 456,368
3 SAFE Investment Company China 1997 No 350,000
4 China Investment Corporation China 2007 Yes 290,000
5 Government of Singapore Investment Corporation Singapore 1981 Yes 247,500

source: Preqin

What the Future Holds for Hedge Funds and Sovereign Wealth Funds

Sovereign wealth funds (SWFs) now make investments in hedge funds but still tend to invest in other types of alternative assets such as infrastructure, private equity and real estate. Research is showing a movement toward hedge fund investments and there will likely be continued signs of SWFs committing capital with hedge fund managers.

Want More Data on Sovereign Wealth Funds?

Annually the research firm Preqin reports on sovereign wealth funds and provides detailed data on their investment activities in fixed income, private equity, public equities,real estate, infrastructure and hedge funds. of the Preqin Sovereign Wealth Fund Review. The 2010 Review represents an valuable tool for all professionals seeking investment or looking to work with this important investor class and includes information on all known SWF’s and their hedge fund investment activity.