10 Largest Sovereign Wealth Funds

In this post, I have listed the 10 largest sovereign wealth funds around the world in terms of assets. These wealth funds are becoming increasingly powerful players on the global financial scene.

But despite their rapid rise, they are often less well understood than other types of investment vehicles.

I will start by answering the question; what is a sovereign wealth fund?. After that, I will give you a brief history of the sovereign wealth funds.

What is a Sovereign Wealth Fund?

Sovereign Wealth Funds are investment funds, mostly state-owned and whose source of revenue are often the balance of payment surpluses, fiscal surpluses and in particular oil or gas resources. According to the Sovereign Wealth Fund Institute, over 88 countries own one, and sovereign wealth fund in hydrocarbon resource-rich countries are managing assets worth more than $4 trillion, with the Norwegian sovereign wealth fund alone having asset value of more than $1 trillion.

History of Largest Sovereign Wealth Funds

Sovereign wealth funds originated in the 1950s. The funds came about as a solution for a country with a budgetary surplus.

Kuwait Investment Authority was the first sovereign wealth fund. It was established in 1953 to invest excess oil revenues.

After two years, Kiribati created a fund to hold its revenue reserves in 1955.

Little new activity occurred until three major funds were created:

  • Abu Dhabi’s Investment Authority (1976)
  • Singapore’s Government Investment Corporation (1981)
  • Norway’s  Petroleum Fund (1990)

Over the last few decades, the size and number of sovereign wealth funds have increased dramatically.

There are more than 88 sovereign wealth funds, and according to the SWF Institute, has exceeding north of $8 trillion.

Which are the 10 Largest Sovereign Wealth Funds by Asset?

This is the list of the 10 largest sovereign wealth funds in the world by asset;

  • Norway Government Pension Fund Global

Assets: $1,098,820,000,000/=

  • China Investment Corporation

Assets: $940,604,000,000/=

  • Abu Dhabi Investment Authority

Assets: $696,660,000,000/=

  • Kuwait Investment Authority

Assets: $592,000,000,000/=

  • Hong Kong Authority Investment Portfolio

Assets: $509,353,000,000/=

  • GIC Private Limited

Assets: $440,000,000,000/=

  • SAFE Investment Company

Assets: $417,844,700,460/=

  • TEMASEK Holdings

Assets: $375,383,000,000/=

  • Qatar Investment Authority

Assets: $328,000,000,000/=

  • National Council for Social Security Fund

Assets: $324,996,000,000/=

What is the largest fund in the world?

Norway’s sovereign wealth fund is the largest in the world. The fund has over $1 trillion in assets. It is managed by the Norwegian Central Bank, the Norges Bank.

The fund was set up as the Petroleum Fund of Norway to invest the surplus from oil sales, but changed to its current name in 2006.

Some of the fund’s biggest equity holdings include Nestlé SA, Royal Dutch Shell (RDS.A), Amazon (AMZN), Apple (AAPL), Alphabet (GOOGL) and Microsoft (MSFT).

Conclusion

The size and number of the 10 largest sovereign wealth funds continue to grow. Sovereign wealth funds will remain a crucial part of the global economy in the future.

One report projects that if sovereign wealth funds continue to grow at their current pace, they will exceed the annual economic output of the U.S. and that of the European Union by 2025.

The emergence of sovereign wealth funds is an important development for international investing.

In conclusion, as regulation and transparency issues get resolved in the coming years, the funds are likely to take on a major role in shaping the global economy.

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Petroleum Prices in Kenya – How Fuel Prices Are Set in Kenya

Petroleum prices in Kenya directly affect the prices of goods made with petroleum products. They also indirectly affect such costs as manufacturing and transport.

High petroleum prices in Kenya is not very good for the economy in both the short-term and long-term. A rise in petroleum prices has a consequence of a rise in the cost of living.

But with plans to export crude oil discovered in Turkana region, higher crude oil prices would be welcome.

Consumer Price Index

High petroleum prices in Kenya usually lead to a rise in the consumer price index. As petroleum prices go up or down, inflation follows in the same direction.

Considering that most consumer products in the Kenya are transported by road, manufacturers and transporters are likely to pass the additional fuel costs to you, the final consumer.

It is worth noting that Kenya is a net importer of petroleum products. Therefore, the country is exposed to global trends in the crude oil and gas prices.

Energy and Petroleum Regulatory Authority (EPRA)

The price of petroleum products in Kenya is not set by market forces, but rather by a formula that is set by Energy and Petroleum Regulatory Authority (EPRA).

Petroleum prices in Kenya are updated on a monthly basis. This update provides the guidelines on the maximum and minimum fuel prices in Kenya.

Raising or lowering the maximum petroleum prices in Kenya, EPRA regulates how much a consumer pays at the pump or petrol stations across the country.

The purpose of the petroleum pricing regulations is to cap the wholesale and retail prices of petroleum products in order to ensure that customers get reasonable prices.

The pricing of the petroleum prices in Kenya takes into consideration the buying price of the product.

In addition, the pricing considers transportation costs both in the ocean and on the road or rail, customs, duties, taxation, currency conversion, and handling fees among others.

Taxation of Petroleum Prices in Kenya

The biggest component in the final petroleum prices in Kenya is actually taxes which take up over 35 per cent of the final fuel prices. Taxes share of fuel prices in Kenya is highest for petrol and lowest for kerosene.

The rise or fall in international crude oil prices, in turn leads to the increase or decrease in fuel prices in Kenya.

Petroleum products in Kenya is driven by several factors. These factors include an increase or decline in global demand, rise of shale production, and the production by the Organization of Oil Producing Countries (OPEC).

As a potential oil producer, Kenya would greatly benefit from the higher crude oil prices, because we would earn higher revenues for our crude oil.

Increase in global crude oil prices are also a great incentive to the exploration firms in the country. There would be an increase in the oil and gas exploration activities.

Conclusion

In conclusion, I would like to propose a policy intervention especially with regard to taxation.

Tax comprises the largest component of the consumer petroleum prices in Kenya. A reduction by even a modest 10 per cent would go a long way in easing off pressure on a majority of Kenyans.

A drastic reduction of taxes will severely cut down revenue to the government from this sub-sector.

However, it will be a boost to the consumers. Similarly, it will positively impact on the manufacturing and production ecosystems.

The country is caught between a rock and a hard place.

Global increase in crude oil prices makes Turkana crude oil lucrative and the entire upstream industry vibrant. But, it also leads to an increase in the petroleum prices in Kenya, which is not a good thing for the consumers.

I would like to hear from you. Leave a comment below or send me a question.

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Sovereign Wealth Fund in Kenya

Sovereign wealth fund in Kenya is of great importance. The country has started exporting crude oil.

In this post, I will look into the 3 reasons for setting up sovereign wealth fund in Kenya This follows the oil discoveries in the Lokichar Basin by Tullow Oil in 2012.

A few years ago, the Presidential Task Force on Parastatal Reforms proposed the establishment of sovereign wealth fund in Kenya.

Because of this, the government of Kenya through Treasury drafted the Kenya National Sovereign Wealth Fund (SWF) Bill. The main aim is to ensure that there is proper management of the proceeds from oil, gas and mining industries.

This would therefore lay the legal framework for managing the oil and gas wealth. A seed capital of $100 million was injected into the fund.

What is a Sovereign Wealth Fund?

Sovereign Wealth Funds are state-owned investment funds. Their main source of revenue is often the balance of payment surpluses, fiscal surpluses and in particular oil or gas resources.

According to the Sovereign Wealth Fund Institute, over 88 countries own one.

Sovereign wealth fund in hydrocarbon resource-rich countries are managing assets worth more than $4 trillion. For example, Norwegian sovereign wealth fund has asset value of more than $1 trillion.

Reasons for the Sovereign Wealth Fund in Kenya

The bill proposes the establishment of three main funds within it;

  • stabilization fund.
  • infrastructure and development fund.
  • future generation fund.

Upstream oil and gas industry in Kenya would benefit from a national sovereign wealth fund.

Therefore, I would like to argue that the setting up of the oil and gas sovereign wealth fund is a step in the right direction. I have three reasons for this;

Reason 1: Stabilization Fund

Firstly, it would provide a clear way in which to invest the revenues from oil, gas and minerals. This is both for the current and future generations.

The setting up of a Stabilization Fund will work as a counter-cyclical economic stabilizer. This will help in smoothening the country’s budget variations in income over a period of time.

Reason 2: Infrastructure and Development Fund

Secondly, it will support the funding of infrastructure in the country. As an emerging economy, Kenya has major deficit in the requisite infrastructure.

Infrastructure and Development Fund will provide the financial resources required for huge infrastructural investments.

For example, Kenya’s funding gap for the infrastructural projects alone is estimated at $ 41 billion over the next couple of years.

Reason 3: Future Generation Fund

Thirdly, the sovereign wealth fund will address the issues of inter-generational equity.

It will make available a pool of savings. In addition, some level of a back-up for the future generations, because these resources are non-renewable.

Conclusion

In conclusion, the above 3 reasons for sovereign wealth fund in Kenya will cut across various sectors. This is due to the multidimensional nature of the interventions that the wealth fund provides.

The multiplier effect of this will be huge to the economy. Every citizen will feel the benefits.

Thank you for reading. I hope you have enjoyed this article on the 3 reasons for a sovereign wealth fund in Kenya. These are stabilizing the economy, supporting infrastructure and taking care of future generations.

Let us keep the conversation going. In other words, I would be happy to hear from you.

If you have any question about this or more, you can leave a comment below or ask the question.

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