Saudi Arabia’s sovereign wealth fund recorded losses of $11B last year, down from the $19B in profit it made the year prior. The kingdom’s $700B fund is aiming to amass $2T in assets before the end of the decade.
Sovereign wealth funds are state-owned funds that invest a country’s surplus cash, often generated through activities like commodity exports. They’re like private funds, but with fewer fleece vests.
And whether they admit it or not, sovereign funds are geopolitical tools:
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- 🇸🇦 Saudi’s fund aims to boost national prestige and diversify the kingdom away from oil, buying everything from Newcastle United and the entire professional sport of golf, through to a new national airline and a vast city in the middle of the desert
- 🇳🇴 Norway’s fund, the biggest in the world at $1.4T, has warned it’ll vote against the re-election of 80 corporate boards if companies don’t set up or hit environmental and social goals
- 🇸🇬 Singapore’s fund ($287B) has invested two-thirds of its cash in its home region, but its chief investment officer says he carefully avoids “areas that are in the crosshairs of US-China tensions”
- 🇨🇳 And China’s main fund ($1.35T) says it’s more cautious about US assets due to bilateral tensions, and has sought to assuage concerns around its investments in Western strategic sectors, promising it won’t “pose a threat to the countries it invests in”.
Intrigue’s take: Who wouldn’t love to have a vast pile of cash, right? These funds can help stabilise an economy, generate income without levying taxes, finance massive national projects, or you can just go full Scrooge McDuck.
But they come with risks: without transparency or accountability, some funds can quickly burn public money through incompetence and corruption. And even the most ridiculously transparent and accountable country (we’re looking at you, Norway) can suffer brutal years in the market (see below).
Still, we’d rather have a vast pile of cash than… not have a vast pile of cash.
Also worth noting:
- Norway’s fund reported a record $164B loss last year, citing Russia’s invasion of Ukraine, high inflation, and rising interest rates.
- Singapore’s fund also just recorded its worst result in years, partly due to its stake in crypto platform FTX (remember them?).