Amid the rapid increase in public indebtedness, spread across developed and emerging economies, some governments have found comfort in their buffers for the proverbial ‘rainy day’. The best known of such buffers are the sovereign wealth funds (SWFs), of which the largest is Norway’s Norges Bank Investment Management. This fund, launched in 1996, has assets under management (AUM) of $2.05 trillion and is alone among the top five SWFs for operating in a democracy. It holds an average 1.5 percent of all listed equities globally.
The fund is subject to parliamentary scrutiny but its managing board can take steps that do not sit comfortably with domestic opinion. It sold its holdings in many Israeli companies following the assault on Gaza that started in October 2022. However, it subsequently suspended its ethical investing rules so as to avoid divesting its stocks in US companies with Israeli government contracts such as Amazon and Microsoft. Further, despite its stance on climate change, the fund favours pushing back net zero targets.
The Norwegian government can draw up to three percent of the fund annually and can make larger withdrawals in exceptional circumstances. The fund provides about one quarter of its budget. The combination of a small population of less than six million, abundant oil and gas resources, and the 30 years the fund has had to accumulate resources together mean that Norway is uniquely placed in terms of defence mechanisms.
Norway’s fund is one of six in the top ten SWFs by AUM that draw their resources from oil and gas receipts. The other four without revenue from energy production are three from China (including Hong Kong) and Singapore’s GIC. The valuations are provided by the SWF Institute and should be viewed as approximations because of differing standards of disclosure.
Emerging economies with larger populations, greater development needs and more onerous geopolitical challenges than Norway must adapt to changing circumstances. Saudi Arabia’s Public Investment Fund (PIF) has expanded rapidly and opportunistically with a focus on high-profile foreign purchases. Endowed with an eight percent stake in Saudi Aramco, its AUM has grown from about $150 billion in 2015 to close to $1.0 trillion.Â
On the surface, it has benefited from the current war in the Middle East because it has been able to export seven million barrels per day of crude at elevated prices through its pipelines to the Red Sea. However, its government is alert to the aspirations of its population and wants to increase its spending on domestic projects within its aim of diversifying its economy, to creating a trade and tourism hub. It is also hosting the 2034 football World Cup. The fund is backing away from its prestigious but lossmaking LIV Golf tour and is scaling back its support for the Trojena ski resort.Â
The quality of governance of SWFs varies greatly. It was reported in the international financial media that Singapore’s Temasek, placed no 11 in rankings by AUM according to the Institute, made salary deductions in May 2023 from staff held responsible for a $270 million investment in FTX, a cryptocurrency exchange that collapsed the previous year.
Court cases in several jurisdictions highlight the danger of inadequate internal controls. In August 2024 a Swiss court gave long jail terms to two senior executives for embezzling $1.8 billion from investments made in 2009 by the Malaysian sovereign fund 1MDB. A US banker was sentenced to two years in prison by a New York court in May 2025 for bribing employees of the same fund. The sentence would have been more severe had he not cooperated with prosecutors. The central figure behind the looting of 1MDB has remained at large and was reported earlier this month to have asked the US Department of Justice for a pardon from the president. (The fugitive, Jho Low, is not to be confused with the American singer!)
The Libyan Investment Authority (LIA) sued a well-known American bank for exploiting its ignorance and persuading it to enter into risky trades that ultimately brought losses of $1.2 billion. The London court heard in June 2016 that a senior employee of the bank arranged for prostitutes to cement its relationship with the authority.
The oldest SWF, depending on one’s definition, is the Texas Permanent School Fund, which was established in 1854. The newest is surely the proposed Strong Canada Fund, which was launched by Mark Carney, the prime minister, in April. The fund has a remit to develop large infrastructure projects and will sit alongside provincial SWFs in Canada: the largest, in Alberta, is funded by oil revenue and stands at no 20 in the rankings of the Institute. More could follow. Last year the founder of Softbank floated the idea of a joint Japanese-US SWF for investments in tech and infrastructure, the underlying idea being that the revenue stream would be outside taxation. Â
As a footnote we turn to the Nigeria Sovereign Investment Authority. It ticks the boxes in terms of governance but is hamstrung by the federal structure of the country. The combined assets of the stabilisation, Nigeria infrastructure and future generations funds stood at $3.4 billion at end-2025. The accumulation of funds by the authority is necessarily slow because the state governments would naturally rather that any surplus funds from energy exports are allocated for their own projects than for federal schemes. The state governors, all 36 of whom sit on the authority’s council, prevail.
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Gregory Kronsten, a London-based Consultant on Africa Finance and Economics, has 40 years’ regional experience in investment banking, stockbroking, macro analysis and publishing. He was chief economist at FBNQuest Capital until December, 2021. He can be reached via comment@businessamlive.com
