Sovereign Wealth Fund

The size of sovereign wealth funds has increased dramatically over the last decade; the top three sovereign wealth fund associations in terms of total assets are Norway Government Pension Fund Global, China Investment Corporation, and Abu Dhabi Investment Authority. Norway Government Pension Fund Global has total assets worth $1,072,840,000,000, according to Sovereign Wealth Fund Institute. Traditionally, sovereign wealth funds invest in relatively assets with low risks as an insurance for the circumstance of their economies not performing very well; however, recent years, some sovereign wealth funds are involving in some relatively risky investment projects, including venture capitals. In addition, the silicon valley has attracted billions of dollars from the sovereign wealth funds, many large tech companies including Tesla, Alphabet, Apple have received investment from these sovereign wealth funds.

We can see that definitely some sovereign wealth funds have switched their strategies. These funds' returns can be very volatile under the strategies. This is not necessarily good or bad, this will depend on the goals these funds are established for. If the fund is established for providing pensions for its population, then such strategy may be concerned to be too risky, as the fund is likely to fail to provide stable returns in order to pay pensions to its population. However, the funds can serve many different purposes. One purpose I think is something which can make a huge difference to the economy as well as the country. Sovereign wealth funds can serve as subsidies to support these innovative companies. Some innovative companies may not be able to earn sufficient profits to support themselves at early stage but have huge potentials to push the development in terms of economy, technology and various ways. Moreover, it can help the development in the sectors where both risk and benefits for the public (private benefit may not be high enough) are high, if lucky enough, the private sector may find a more efficient way to make itself richer as well as the public life improved under the support from sovereign wealth fund.

To conclude, the tradition way is investing against risk, and the new strategy which is carried out by some sovereign wealth fund I think is investing in future.