Selected Sovereign Wealth Funds 

Estimated Source of 

Country Name of Fund Assets1

 ($bn) Funds

UAE Abu Dhabi Investment Authority 250-8752 oil and gas

Norway Government Pension Fund - Global 397 oil and gas

Saudi Arabia Saudi Arabia Monetary Agency 2503 oil and gas

Kuwait Kuwait Investment Authority 213 oil and gas

China China Investment Corporation 200 non-commodity

Singapore Government Investment Corporation >100 non-commodity

Russia Stabilization Fund 144 oil and gas

South Korea Korea Investment Corporation 20 non-commodity

1 National data unless otherwise noted. 2

 Range of market estimates 3 Non-reserve foreign assets.

Net Issuance 

-400

-200

0

200

400

600

800

1000

1200

1400

2000 2001 2002 2003 2004 2005 2006 2007

$ billions

-400

-200

0

200

400

600

800

1000

1200

1400

UK Treasury

Euro Area Gov

U.S. Agency

U.S. Treasury

Reserve Grow th

Appendix 2: Sovereign Wealth Funds 

Global cross-border assets of the official sector continue to rise at a rapid pace. The IMF 

projects that sovereigns will continue to accumulate foreign assets at a rate of $800-900 billion 

per year.

1

 Cross-border assets of the official sector include about $6 trillion in foreign exchange 

reserve holdings and approximately $1.9-2.9 trillion in sovereign wealth fund (SWF) holdings. 

Of course, absolute size alone is an 

insufficient metric to assess the 

relative importance of official 

reserves and SWFs in the 

international financial system. 

Below are four different relative 

metrics: private pools of capital; net 

new issuance of traditional reserve 

assets; existing stocks of traditional 

reserve assets; and existing stocks 

of other financial assets. 

Private Pools of Capital 

To get a better perspective of the relative importance of SWFs, it is useful to consider how they 

measure up against private pools of global capital. Total SWF assets of $1.9-2.9 trillion may be 

small relative to the roughly $62 trillion managed by private institutional investors. But SWF 

assets are currently larger than the total assets under management by either hedge funds or 

private equity funds (estimated at $1.5 trillion and $700 billion, respectively), and are set to grow 

at a much faster pace. Some private analysts project that aggregate SWF assets could grow to 

$7-8 trillion by 2012 and to $12-15 trillion by 2015. 

“Forced Diversification” of Official Flows 

Global official reserve accumulation 

is running far ahead of new net 

issuance of traditional reserve assets. 

In 2007, assuming an annualized rate 

of global reserves growth of 27 

percent (based on actual reserve 

growth in Q2), new reserves 

accumulation would be $1.3 trillion 

and net new issuance $603 billion. So 

even if emerging market central banks 

purchased all new net issuance of 

traditional reserve assets in 2007, they 

would still need to find somewhere to 

invest roughly $742 billion. 

 

1

 Annex 1.2. Sovereign Wealth Funds, IMF Global Financial Stability Report, September 2007. 
2

0

10

20

30

40

50

60

70

80

Reserves

+ SWFs

Public 

Bonds

Private

Bonds

Stocks Bank 

Assets

0

10

20

30

40

50

60

70

80

US

EU

Japan

Other

$trillions

Source: Treasury estimates and IMF

Reserves Size Relative to Stocks of Traditional Reserve Assets 

This $742 billion could also be invested not just in new issuance but also in existing stocks of 

traditional reserve assets through secondary debt markets. Official reserves amounted to nearly 

40 percent of the outstanding stock of U.S. Treasuries, Agencies, and Euro-area and UK 

government securities in 2006. For U.S. Treasuries and Agencies specifically, Treasury 

International Capital reporting system data show that on June 30, 2006, foreign official holdings 

constituted 37 percent of marketable long-term Treasury and 8 percent of long-term Agency 

securities. 

Reserves and SWF Size Relative to Stocks of Other Financial Assets 

Other mainstream financial asset classes are 

absorbing most of the remaining reserve and 

SWF assets that diversify away from traditional 

assets. Reserves and SWFs are still small 

relative to global financial assets, estimated by 

the IMF to be $190 trillion in 2006. Of that, 

$120 trillion is stocks and bonds. $96 trillion is 

in U.S., EU or Japanese markets. Private 

analysts believe that currently only a relatively 

small share of assets is allocated to alternative 

asset classes such as private equity, real estate, 

or commodities. 

Policy Issues 

SWFs represent a large and rapidly growing stock of government-controlled assets, invested 

more aggressively than traditional reserves, with implications for the international financial 

system. 

SWFs have the potential to promote financial stability. They are, in principle, long term, stable 

investors that provide significant capital to the system. They are typically not highly leveraged 

and cannot be forced by capital requirements or investor withdrawals to liquidate positions 

rapidly. SWFs, as public sector entities, should have an interest in and a responsibility for 

financial market stability. Foreign direct investment by SWFs can contribute to economic 

growth in recipient countries. 

SWFs also raise two sets of potential concerns: 

On the investment side, SWFs could provoke investment protectionism, which could have 

negative consequences for the global economy. Transactions involving SWF investment may 

raise legitimate national security concerns. SWFs may also raise a number of non-national 

security issues related to a larger role of foreign governments in markets. For example, through 

inefficient allocation of capital, perceived unfair competition with private firms, or the pursuit of 

broader strategic rather than strictly economic return-oriented investments, SWFs could 

potentially distort markets. 

On the financial markets side, SWFs may also raise concerns related to financial stability. They 

can represent large, concentrated, and often non-transparent positions in certain markets and 

asset classes. Actual shifts in their asset allocations could cause market volatility. In fact, even 
3

perceived shifts or rumors can cause volatility as the market reacts to what it perceives SWFs to 

be doing. 

Policy Response 

The Department of the Treasury, in coordination with other U.S. government agencies, is 

working to shape an appropriate international policy response to financial market and investment 

issues raised by SWFs. 

First, as the chair of the Committee on Foreign Investment in the United States (CFIUS), 

Treasury is implementing the new Foreign Investment and National Security Act of 2007 

(FINSA), which has introduced several reforms to the CFIUS process. CFIUS reviews certain 

foreign direct investments, including from SWFs. CFIUS reviewed its first SWF investment 

soon after beginning reviews under the 1988 Exon-Florio amendment to the Defense Production 

Act. CFIUS’s focus has always been limited to transactions that raise genuine national security 

issues, and FINSA maintains that focus. The U.S. investment security framework, as improved 

by FINSA, helps protect national security while maintaining the longstanding U.S. commitment 

to open investment policies. Treasury is actively engaging countries where protectionist 

sentiment is on the rise to help them avoid reactionary policies. 

Second, Treasury has proposed that the international community collaborate on a multilateral 

framework for best practices. The International Monetary Fund, with support from the World 

Bank, should develop best practices for SWFs, building on existing best practices for foreign 

exchange reserve management. These would provide guidance to new funds on how to structure 

themselves, reduce any potential systemic risk, and help demonstrate to critics that SWFs can be 

responsible, constructive participants in the international financial system. 

Third, the Organization for Economic Cooperation and Development (OECD) should identify 

best practices for countries that receive foreign government-controlled investment, based on its 

extensive work on promoting open investment regimes. These should have a focus on 

proportionality, predictability and accountability, and should be guided by the well-established 

principles embraced by OECD and its members for the treatment of foreign investment. It is 

important to address the growing importance of SWFs, on both sides of the investment equation. 

The Treasury has already achieved meaningful progress along these lines. On October 19, 

Secretary Paulson hosted a G-7 outreach dinner with Finance Ministers and heads of SWFs from 

eight countries (China, Korea, Kuwait, Norway, Russia, Saudi Arabia, Singapore, and the United 

Arab Emirates) to build support for a set of best practices for SWFs. On October 20, the 

International Monetary and Financial Committee (IMFC) – a ministerial level advisory 

committee to the IMF – issued a statement calling on the IMF to begin a dialogue to identify best 

practices for SWFs. On November 15-16, the IMF hosted a roundtable meeting for sovereign 

asset and reserve managers. In response to the IMFC statement, the IMF added a special session 

on policy and operational issues relating to SWFs for official sector delegates. This marks the 

beginning of an important process in the IMF. IMF Managing Director Dominique Strauss-Kahn 

opened the roundtable meeting and underlined that some form of agreement on best practices for 

the operations of SWFs could help maintain an open global financial system.2

 A separate 

 

2

 IMF Convenes First Annual Roundtable of Sovereign Asset and Reserve Managers, IMF Press Release, November 

16, 2007. http://www.imf.org/external/np/sec/pr/2007/pr07267.htm
4

dialogue is well underway in the OECD on investment policy issues with regard to SWFs, 

building on the discussions on Freedom of Investment, National Security, and “Strategic” 

Industries. 

Fourth, Treasury has taken a number of steps internally and within the U.S. Government to 

enhance our understanding of SWFs. Treasury has created a working group on SWFs that draws 

on the expertise of Treasury's offices of International Affairs and Domestic Finance. Treasury's 

new market room is ensuring vigilant, ongoing monitoring of SWF trends and transactions. 

Through the President's Working Group on Financial Markets, chaired by Secretary Paulson, we 

continue to discuss and review SWFs. We also have initiated bilateral outreach to ensure an 

ongoing and candid dialogue with countries with significant SWFs and their management. 

The Treasury Department will continue its work on SWFs through bilateral and multilateral 

efforts to ensure the United States shapes an appropriate international response to this issue, 

addresses legitimate areas of concern, and ensures that the United States remains welcoming of 

foreign investment. Treasury will also continue to keep Congress closely informed, both through 

formal testimony such as that of Under Secretary McCormick3

 on November 14 to the Senate 

Committee on Banking, Housing, and Urban Affairs and staff briefings. 

 

3 http://www.treas.gov/press/releases/hp681.htm