Y13 students should become familiar with the term 'Sovereign Wealth Funds'. Essential knowledge in the study of global economics, trade, investment and currency developments. As you will see, we are famous here in the UAE as we have the oldest & biggest SWF in the world!

A sovereign wealth fund is a government or state run investment fund usually created by supernormal profits from natural resources such as oil, gas or minerals.

Here is some brief background on them:


The oldest SWF is the UAE-Abu Dhabi Fund established in 1976, one of the most recent is the one created by Russia in 2008.

The largest sovereign wealth fund (measured by the US $ value of assets under management) is the Abu Dhabi Investment Authority with $627bn. The Chinese Investment Corporation (CIC) has $410bn and the Kuwait Investment Authority had $296 under management at the end of 2011.

Sovereign wealth fund investment in the UK has grown rapidly over the years - it attracted $68 bn of total SWF investment in the six years to the end of 2011. Here are some high profile examples:

1/ Thames Water (9.9% stake bought by China Investment Authority)

2/ BAA Airports Group (17.7% owned by GIC of Singapore)

3/ Sainsbury’s (26% stake owned by Qatar Investment Authority)

4/ London 2012 Olympic Village (100% owned by Qatar Investment Authority)

From investment in corporate bonds and equities, real estate, infrastructure projects, government debt and hedge funds / private equity - the increasing financial muscle and influence of state investment funds is a key development to be aware of. There is rising pressure for these funds to be more transparent in their dealings - in the past they have been highly secretive.

Do you consider their impact to be positive for the UK economy at this crucial stage of the economic cycle? To what extent is the expansion of SWF power a reflection of the changing centre of gravity in the world economy?

Qatar looks to diversify away from gas


Q's for discussion: In light of the above information, assess the advantages & disadvantages of SWF for the UK.