Basics
Sovereign Wealth Funds and the Global Financial System
Financial Services
Published on April 28, 2025
Explore This BasicSovereign Wealth Funds (SWFs) are government-owned investment funds and have become an integral part of many countries’ economic strategies, providing a means for governments to manage national wealth. While countries like Norway and China have successfully implemented SWFs, the United States has yet to establish one. This Basic will examine the background and purposes of SWFs, the role of foreign currency reserves, and the broader context of U.S. dollar dominance.
Globally, the largest sovereign wealth funds (SWFs) are often tied to resource-rich nations or those with surplus national income. For instance, the Government Pension Fund of Norway, which is the largest SWF, invests the country’s oil revenue in global financial markets. Other major SWFs include the China Investment Corporation (CIC), which manages China’s foreign currency reserves, and the Abu Dhabi Investment Authority (ADIA), managing assets derived from oil and gas revenues.
These funds typically focus on a range of investments—stocks, bonds, and alternative investments like hedge funds, private credit, private equity, and real estate—to create stable, long-term financial returns for their nations. Their success largely stems from their ability to manage surplus resources effectively, creating wealth for future generations.
Links to Other Resources
- Cato Institute – A US Sovereign Wealth Fund is a Bad Idea
- Congressional Research Service – The U.S. Dollar as the World’s Dominant Reserve Currency
- Corporate Finance Institute – Currency Crisis
- Council on Foreign Relations – The Dollar: The World’s Reserve Currency
- International Forum of Sovereign Wealth Funds – What is a Sovereign Wealth Fund?
- International Monetary Fund – Dollar Dominance in the International Reserve System
- The White House – A Plan for Establishing a United States Sovereign Wealth Fund