The Sovereign Wealth Fund Paradox: Evolution, Challenges, and Unresolved Issues
Department of Economics, University of Memphis, Memphis, TN 38152, USA
J. Risk Financial Manag. 2026, 19(2), 119; https://doi.org/10.3390/jrfm19020119
Submission received: 28 October 2024
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Revised: 1 January 2026
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Accepted: 6 January 2026
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Published: 5 February 2026
(This article belongs to the Special Issue Globalization and Economic Integration)
Abstract
Sovereign wealth funds enhance the international movement of capital and often facilitate economic development in domestic and host countries. However, the lack of transparency and accountability of SWFs varies, and state ownership gives rise to suspicions and realizations of political motivations, unfair commercial advantages, opportunities for corruption, and national security threats, thereby challenging the liberal economic order. This paper provides an overview and identifies major concerns and policy options associated with SWFs. Defining SWFs, measuring their size and transparency, domestic, cultural, and political origins, and policies for oversight and mitigation of geopolitical risk are discussed. The goals and behavior of SWFs are too diverse to draw broad, general conclusions. The growth in the number of funds and assets under management has increased their diversity, but the essential defining characteristic is that they are state-owned financial investment vehicles not subject to the hard budget constraints or regulations of comparable private sector, market-oriented entities. Transparency varies, with democratic country SWFs more transparent and less problematic than those of autocracies. SWFs have evolved into unbounded state-owned entities ushering in a new era of financial statecraft. Policies to guide their behavior and enforcement mechanisms are host-country specific and highly variable. An often-discussed international regulatory framework to mitigate geopolitical risk has not emerged and is not likely.
Keywords:
sovereign wealth funds; transparency; accountability; national security; geo-political riskJEL Classification:
F33; G20; O53; P331. Introduction
Sovereign Wealth Funds (SWFs) have evolved from obscure financial entities to major players in global capital markets, managing over an estimated USD 14 trillion in assets in 2025.1 Their growing influence, coupled with persistent issues regarding transparency, governance, and geopolitical and international security risks, demands the attention of policy makers, economists, and security analysts. The survey and analysis below examine the history, structural diversity, and unresolved challenges in governance and international relations.
2. The Evolution and Systemic Importance of SWFs: From Kuwait to Global Systemic Players
The modern concept of a SWF originated in 1953 with the opening of the Kuwait Investment Office in London, eight years before Kuwait’s independence. This evolved into the Kuwait Investment Authority, generally considered the first SWF,2 which now manages a portfolio of equities, fixed income, and alternative assets estimated at over a trillion USD.3 Early on, SWFs operated with little notice, but the 21st century has seen an explosive growth, from 20 funds managing about USD 500 billion in 2000 to now with the top 50 managing over USD 14 trillion. This growth has transformed SWFs into systemic economic actors capable of influencing asset prices, corporate governance, and international political dynamics. The financial crisis in 2008–2009 marked a turning point for SWFs as they injected an estimated USD 90 billion into distressed Western financial institutions, providing critical liquidity and expanding their role as stabilization funds beyond their domestic borders.4 While selectively beneficial, these actions also raised concerns about the motives of state-backed investors, particularly those from non-democratic regimes. Then, again during the COVID-19 pandemic, SWFs provided financing for domestic stimulus programs, becoming a critical fiscal policy tool for their host country.
Their purpose and activities are now wide ranging, if not unlimited, and for many there is limited available description, analysis, or evaluation of their activities and performance because of the lack of transparency. Several are recognized as very transparent and well managed (e.g., the Norway Government Pension Fund—General (NGPF) and the New Zealand Superannuation Fund (NZSF), inter alia), and others are severely opaque (e.g., Russian Direct Investment Fund, China’s SAFE Investment Company, United Arab Emirates Dubai World, inter alia). In addition, moving parallel with the development of SWFs are Sovereign Investment Funds (SIFs), which focus primarily on domestic development objectives.5
After a basic discussion of the definition and characteristics of SWFs below in Section 2, and an overview of the scope and magnitude of assets under management in Section 3, specific issues and challenges are addressed in the sections that follow. The academic literature discussed in those sections is drawn from several distinct areas of research. First, the financial economics perspective emphasizes the SWF role as a source of patient capital contributing to improved overall portfolio diversification. However, this literature suffers from sample selection bias as, by necessity, the focus tends to be on the most transparent funds, like NNGPF or the NZSF, inter alia, which publish detailed investment reports and adhere to or exceed the Santiago Principles, following their own country-specific corporate governance and financial reporting standards.6 In contrast, opaque funds, e.g., like those mentioned above (or in Table 1b or Table 1c discussed below) also by necessity, are generally ignored in most financial analyses. Most funds fall in the middle of the transparency spectrum (like those in Table 1b discussed below), and this creates wide gaps in the understanding of risk–return profiles across the range of SWFs.7 Most of the finance literature focuses on traditional finance issues, like the impact of SWF investments on individual company share prices or returns,8 but the studies rely on very specific samples of SWF and are usually not generalizable to SWFs as a group. In meta-reviews of the literature, e.g., Bahoo et al. (2020) or Mami (2023), analytical results and conclusions are typically described as mixed.9
Importantly, SWFs face a complex principal agent problem as even the identified principal varies across SWFs. Cuervo-Cazurra et al. (2023) examine the principal agent problem in detail. In their analysis, the principal may be future generations, the current population, or simply the “rulers” as the embodiment of the nation. The goals will then differ, and the agents may achieve them with highly variable levels of success. Braunstein (2017) links agency to structure in his case study of Singapore and Hong Kong. His introduction offers a brief review of international political economy and organizational sociology theory and argues that the heterogeneity of SWFs is attributable to domestic cultural and politics. Megginson and Fotak (2015) emphasize the diversity of SWFs must be taken into account. Cuervo-Cazurra et al. (2022) provide a review and framework for the analysis of SWFs vis-a-vis other state owned multinational firms.
A second stream of the literature focuses on corporate governance and transparency and reveals stark disparities in transparency of activities, investment strategies, and internal controls. This line of research was pioneered by Truman (2007) at the Peterson Institute and this discussion remains contentious with many issues unresolved.10 Similarly, Linaburg and Maduell developed an alternative measure of transparency. Both are indirectly related to analyses of SWF compliance with the Santiago Principles, a voluntary set of “generally accepted principles and practices” for measuring the effectiveness of governance and oversight of SWFs. Much of the research in this area is in the realm of accounting and law, or “soft law.” These indices and related issues are discussed in detail in Section 4 below.
A third stream of the literature in sociology and political economy emphasizes that while the behavior of individual SWFs is driven by the state and performance of the domestic economy, which is deeply rooted in the domestic cultural, political, and social structure, and momentary competitive political dynamics. The state of domestic affairs then influences or directs SWF international activities. These, in turn, create persistent geopolitical concerns unresolvable in the current global environment. These issues are discussed in Section 5.
Finally, another stream of the literature focuses on these geopolitical and security concerns arguing that SWFs serve as instruments of “financial statecraft”. This literature elevates governance issues to the state level, focusing heavily on the lack of transparency and underlying political objectives of the funds.11 Regardless of legal structure, the funds are state entities that de facto and de jure pursue the objectives of the state without the hard economic constraints of profitability or efficiency of a typical private entity in a market economy, e.g., the China Investment Corporation (CIC) has invested strategically along with other Chinese firms, in ports, energy infrastructure, and tech firms aligned with Beijing’s Belt and Road Initiative.12 These issues are discussed further in Section 6.
Intertwined in these streams of research are discussions of actual performance of SWFs and recipient-country policy responses discussed in Section 7. Section 8 provides a summary and conclusion. There, I conclude that despite years of international discussions, the fundamental issues remain unresolved, and broad conclusions are difficult to make because of the heterogeneity of sovereign wealth funds in and of themselves. Many SWFs are clearly state actors, and their analysis demands not only traditional financial and economic analysis, but a broader socio-political approach found in the literature on international affairs and international state craft. The explicit role of the state will frame or dominate market forces. An acceptable international regulatory organization is not likely to evolve, and individual countries are and will continue to be forced to cope individually. Or, at best, regional organizations like the OECD may provide general guidelines with wide latitude for individual country actions.
3. Sovereign Funds—A Taxonomy of Objectives and Evolutionary Challenges
“Sovereign Wealth Funds (SWFs) are pools of assets owned and managed directly or indirectly by governments to achieve national objectives.”13 Typically, they have been funded by commodity revenues, e.g., royalties on the sale of natural resources, foreign exchange reserves, or fiscal surpluses. The IMF (2008) identified five types of funds based on their main objective: (1) stabilization funds, designed to insulate the national budget and domestic economy from commodity price swings, usually oil, (2) savings funds, designed to realize and convert natural resource wealth into more diversified assets for future generations and mitigate the effects of Dutch disease, (3) reserve investment corporations, designed to increase the return on foreign reserve assets (which otherwise are typically invested in very short term assets to be available for currency exchange rate management purposes), (4) development funds, designed to finance domestic infrastructure and industrial policies and support socio-economic projects or overall development objectives, and (5) pension reserve funds, which pre-fund national pension systems (from sources independent of individual contributions) or provide for unspecified contingent liabilities.14 The wide ranging purposes of SWFs are important as the purpose leads to differing objectives, governance, asset allocations, and performance measures.15 This taxonomy serves as a strong starting point and remains most influential, but is challenged by increasingly strained institutional innovation and the blurring of functional lines among these categories. In its purist sense, it fails to capture hybrid entities like Singapore’s Temasek Holdings, which combines development objectives with commercial return targets.16 Often, a SWF’s purpose has been expanded, depending on the needs of the state. As mentioned, during the financial crisis and COVID, these funds have been a significant source of liquidity utilized to stabilize the economy, recapitalize a wide range of domestic and foreign firms, or recapitalize the entire banking and financial systems.17 In these cases, SWFs were seen as a coping mechanism, outside of their original design, to ameliorate real economic crises.
Strategic investment funds (SIFs) or companies may be included in discussions of sovereign wealth funds although they differ considerably in their source of funding, primarily direct government appropriations, and their goals are much narrower than most SWFs.18 They focus on national strategic economic objectives, e.g., supporting critical industries, supply chains, or technologies. In addition, infrastructure to support innovation and sectors vital to national security are often major areas of investment. SIFs present a whole range of additional issues as agents of the state with strategic, economic, and political objectives.19 In any case, there is still a wide-ranging discussion about which entities should be considered SWFs or not.20 In reality, they simply now fall into a broad general category of highly diverse state-owned investment entities.
4. The Magnitude of SWFs: Assets Under Management
It is very difficult to construct comparative data for SWFs. Reporting is voluntary, there are no uniform, obligatory reporting standards,21 and different analysts have compiled data at different points in time, for different measures of assets and in different currencies (or in USD at different exchange rates). Global SWF provides comprehensive running totals of estimates of assets of SWFs, broadly defined, pension funds and central banks but full access is proprietary. Other authors, e.g., Truman (2007, 2008a, 2008b, 2010, inter alia) and the Peterson Institute of International Economics also provide estimates along with the Truman Transparency Score (TTS). Many other authors do as well, at particular points in time with differing methodologies, but importantly, for the least transparent SWFs the estimates vary by significant amounts.
Regardless of the origin of their revenues or their specific purpose, SWFs have become large enough to be systemically important. The growth in assets under management and general activities of SWFs largely tracks the overall global economy, especially commodity prices. While estimates of total assets at particular points in time have merit, longer-term growth projections have proved to be very incorrect. While the general trend has been and is now positive, both the global financial crisis and COVID-19 broadened the range of activities of SWFs, their investments, returns, and disbursements. The response to these global crises provide examples of how the large pool of assets and the agility of SWF management may play a critical stabilizing role, both internationally and domestically. López (2023) provides an overview of the response of SWFs to these crises noting that during the financial crisis SWFs injected USD 71.2 billion into major financial institutions and during COVID-19 disbursed USD 211.3 billion, primarily in their own domestic economies. In many cases, these actions were significant enough to affect total assets under management.
The Appendix A Table A1 provides data on the top 50 SWFs including estimates of assets under management (AuM), transparency indices, and country characteristics.22 Estimates of assets under management by the SWF Institute, Global SWF, and the amounts reported by the individual SWF itself, when available, are reported in the first three data columns. The top five SWFs manage over a trillion USD each, while the smallest of the top 50 manage less than USD 10 billion. In total the top 50 funds manage just over USD 14 trillion. Early on, Kimmitt (2008) provided some perspective by noting relative to other types of participants in the financial markets, SWF assets are small compared to total global assets under management by all financial institutions. Today, the largest SWFs individually are in the same league as large US hedge funds.23 The number of individual hedge funds and pension funds is much larger than the number of SWFs but the concentration of assets in a handful of SWFs is much greater. Although possible, it is not likely, because of regulatory oversight, that any one hedge fund or pension fund would substantially and permanently move a market. It is clear though that politically motivated SWFs could be significant players—able to move markets—in selected smaller equity and debt markets.
Also noted in Table 1 are the Truman Transparency Score (TTS), the Linaburg–Maduell Transparency Index (LMTI) and the Governance and Sustainability Score (GSR), discussed further below. The varying transparency scores provide a significant warning that the estimates of assets under management must be interpreted with caution since some of the largest SWFs are also not transparent. Over time, the Norwegian fund has been recognized as a model for SWFs, both in transparency and in general management. From Table 1, we see it remains the largest, at about USD 1.667 trillion, and has a Truman Transparency score of 100 out of 100 possible. The next two largest funds, China Investment Corporation (CIC), has assets over a trillion US dollars and a score of 74, but China’s State Administration of Foreign Exchange (SAFE IC) with estimated assets over a trillion USD is not scored by Truman but scores 2 out of 10 on the Linaburg–Maduell index.
5. Measuring Transparency and Governance and the Failure of the IFSWF Santiago Principles
5.1. Measures of Transparency
Truman (2007) discussed the need for greater transparency and accountability of SWFs very early on. The Asian financial crisis provided further motivation for focusing on transparency and accountability, which was cited by the Group of 22 working group on the financial crisis report as a complicating factor in managing the financial crisis. There are several on-going efforts to evaluate or “score” SWFs. The earliest, most notable, and best documented measure of overall SWF behavior is that developed by Edwin Truman, then at the Peterson Institute. (Hereafter, the Truman Transparency Score, TTS).24 These transparency scores have been continuously refined and updated since then, and additional SWFs have been added to the sample. Parallel to Truman’s efforts, a second long-standing comprehensive measure of transparency is the Linaburg–Maduell transparency index (LMTI), now under the auspices of the SWF Institute. Also of interest, Lopez (2020) calculates a Governance, Sustainability and Resilience (GSR) score card which covers public pensions and SWFs. It also has a transparency and accountability component.25 The TTS, the LMTI, and the GSR are reported in the table in the Appendix A for the top 50 SWFs.
Based on the latest TTS, the SWFs are regrouped as more transparent, less transparent, and those not evaluated and presented in Table 1a–c. The TTS, LMTI, and GSR measures, while they often do not agree, are correlated (discussed below) and clearly illustrate the highly diverse nature of the management of SWFs. The details of the Truman Score are further revealing.
The overall score that Truman calculates is based upon 33 individual criteria grouped into indicators evaluating the structure (including fiscal treatment), governance, transparency, accountability (which includes investment strategy implementation, investment activities, reporting, audits), and behavior.26 The maximum score is 100. Table 1 of Maire et al. (2021) provides the latest scoring (2019) for 64 sovereign wealth funds.27 From their analysis, Norway’s Government Pension Fund—Global scores 100 and Equatorial Guinea’s Fund for Future Generations scores an 11, the lowest of those scored. Twelve of the eighteen funds with scores above eighty are OECD countries. Most of the SWFs with scores above 80 are from developed economies such as Norway, the US, New Zealand, Canada, France, Ireland, Netherlands, Japan, and Australia. However, the TTSs of Azerbaijan, Korea, Nigeria, Palestine, Timor-Leste, and Trinidad and Tobago are also included in that range. In their analysis the lowest SWF scores, 30 or less, include SWFs from Brunei, Algeria, UAE, Libya, and Equatorial Guinea. It is difficult to compare SWF scores, especially for those in the middle of the range, since the scores for the individual components vary widely, and their relative importance varies. Nonetheless, the scoring provides a basis for discussions of specific problematic issues and concerns, and some general conclusions emerge.
To emphasize the range and differences in transparency, the Appendix A Table A1 for the top 50 SWFs is disaggregated by transparency. Table 1a below provides the SWFs with greater than or equal to the median TTS, Table 1b presents those with below-median scores and Table 1c those SWFs not scored. We see that the most transparent SWFs, Table 1a, include the largest, the top four (Norway GPFG, China Investment Corporation, Abu Dhabi Investment Authority, and Kuwait Investment Authority) each with over a trillion USD in AuM and others that are very small (Azerbaijan, Timor-Leste, and Ireland) with less than USD 25 billion in AuM. The median value of AuM for this group is USD 252 billion. The less transparent SWFs, below the median TTS, in Table 1b, also exhibit a similar pattern, with very large funds, the Public Investment Fund of Saudi Arabia and GIC Private Limited of Singapore each with over USD 800 billion AuM, as well as smaller SWFs like the Russian Direct Investment Fund, Mumtalakat Holding of Bahrain, and the Revenue Regulation Fund of Algeria with less than USD 25 billion under management. The median value of AuM is USD 91 billion, significantly less than the median for the top 50 as a whole, and the most transparent funds as well. The AuM for SWFs not ranked at all (for TTS) follow the same pattern, with some very large funds, like SAFE Investment Company of China over USD 1 trillion AuM, and Badan Pengola Investasi Daya Angata Nursantra, of Indonesia with USD 600 billion along with many smaller funds like the Fund for Reconstruction and Development of Uzbekistan with USD 23 billion AuM.
From Table 2 below, while the ranges of scores in each grouping are large, regional patterns are clear: (1) SWFs from OECD countries average score is much higher than non-OECD countries; (2) of the non-OECD SWFs Latin American SWFs score next highest, (3) of non-OECD SWFs, Middle East, both Gulf Coast Countries (GCC), and non-GCC SWFs score low on average, in the mid-50s, (4) Africa and Russia score lowest overall. The non-Middle East SWFs, excluding Africa and Russia, score higher than the Middle East SWFs.28 Separately, from Maire et al. (2021) it is seen that pension funds score higher on average than non-pension funds and IFSWF members average scores (for those reporting) are not different than non-members.
While our discussions are based on the Truman Score, it is important to note that the TTS and the Linaburg–Maduell index measures are correlated and provide roughly the same information. Table 3a indicates that they are correlated at 0.67 for the top 50 SWFs (listed in the Appendix A) but Table 3b indicates an even higher correlation, at 0.81, for those that are most transparent (those in Table 1a). The correlation is less, 0.4, in Table 3c, for SWFs deemed less transparent (those in Table 1b). From Table 3a–c we see that the TTS and LMTI are also correlated with the GSR but at lower levels. The correlation between TTS and the GSR is slightly higher than that for LMTI and GSR. The correlation between the TTS and LMTI for the most transparent SWFs is reassuring, but the lower correlation for the less transparent SWFs is a clear signal that transparency matters, and very different conclusions may be reached about SWFs even among highly respected evaluators.
These differences are accentuated when we compare the transparency measures with other country characteristics. Wang and Li (2016) links these variations to domestic legal and country governance structures.29 Democracies with robust oversight mechanisms tend to have more transparent SWFs, while authoritarian regimes often treat fund operations as state secrets. Cuervo-Cazurra et al. (2023) found positive correlation between democracy (based on the polity score of democracy measure constructed by the Centre for Systemic Peace) and transparency and the LMTI. They find authoritarian countries tend to have less transparent SWFs. In the sample of the largest 50 SWFs (Appendix A Table A1) and Table 1a–c, we include the Democracy Index from the Economist Intelligence Unit and the Autocracy Score from the Center for Systemic Peace.
For our sample of the 50 largest SWFs Table 3a–c present the correlations between the TTS and the LMTI with country characteristics, the GSR, the Democracy Index, and the Autocracy Score for the full sample and the two subsamples (high and low transparency SWFs as defined in Table 1b,c). We see from Table 3a that the TTS is correlated with the GSR, Democracy Score, and Autocracy score at 0.45, 0.73, and −0.72, respectively, for the full sample. The LMTI is correlated with these measures as well but at lower levels: 0.37, 0.5, and −0.48, respectively. For the most transparent SWFs, Table 3b, the TTS and LMTI correlations with the country characteristics are about the same as the full sample; and again, the LMTI correlations with country characteristics are lower than those for the TTI. For the less transparent subsample of SWFs, the correlations for both the TTS and the LMTI with country characteristics is much lower. For the TTS, the correlations are 0.3, 0.48, and −0.31 for the GSR, the Democracy Index, and the Autocracy Index, respectively. For the LMTI, the correlations are even lower at 0.16, 0.08, and −0.13, respectively. While macro-level measures of country characteristics are not sufficient to explain transparency, the TTS is generally more highly correlated with desirable country characteristics, even more so for the most transparent SWFs. Overall, we also observe that the less democratic, more authoritarian countries have lower median TTS and LMTI. The results affirm and accentuate Wang and Li’s (2016) and Cuervo-Cazurra et al.’s (2023) findings that democratic countries have more robust regulatory oversight and have more transparent SWFs.
5.2. The Santiago Principles
Many of the transparency issues found in Truman’s scoreboard have been discussed by individual countries and international organizations (the OECD and IMF in particular) for years, and individual attitudes toward SWFs are varied (See Černohorský & Tesnerová, 2020). Due to the wide divergence of interests and contentious nature of the issues, such as the tension between market liberalism vis-a-vis state-directed actions and nationalism in the SWF home country and the conflict between foreign investment policies and national security issues in recipient countries, a formal treaty, law, or organization for oversight of SWF governance and accountability has not emerged. Instead, a voluntary set of best practices, the Santiago Principles,30 emerged from the earliest discussions of the IMF Working Group (IWG) on Sovereign Wealth Funds.31 There are 24 specific principles (some disaggregated further) to which the international working group agreed and which address many of the issues raised regarding the management of sovereign wealth funds. Also, from the discussions, a new membership-owned organization, the International Forum for Sovereign Wealth Funds (IFSWF), emerged. While the original group created these guidelines, they are voluntary, as is membership.32 The IFSWF is designed “to promote understanding of SWFs” and “encourage appropriate disclosure” of activities in line with the Santiago Principles. The Principles are voluntary, or “encouraged,” and there is no means of external monitoring for compliance, evaluation, or enforcement. Nonetheless, Truman (2010, Appendix 6A) compares them point by point with his scoreboard criteria, noting extensive overlap, which suggests that Truman’s scorecard is close to a measurable benchmark for the Santiago Principles and is applied to members and non-members alike. It is obvious that the degree of compliance varies widely. Behrendt (2010) also assesses a set of major SWF’s compliance with the Santiago Principles and emphasizes the inexplicable variation in compliance. Rose (2013), in an extensive review of corporate governance issues, concludes that SWFs underinvest in governance, and the lack of transparency is detrimental to their own long-term goals. Both SWF home countries and recipient countries should provide encouragement for stronger governance.
The Santiago Principles, while useful, are not considered sufficient to address the issues raised above and are not without critics, especially due to their voluntary nature. Transparency and better governance is essential for both host- and recipient-country governments. But recipient-country governments are still left to address concerns of anti-competitiveness, market disruptions, political influence, and national security issues on their own. “Because sovereign wealth funds are owned by and ultimately controlled by governments, it is naïve to believe that they can or should be treated as apolitical. The standards applied to sovereign wealth funds should be higher than those applied to private sector institutions precisely because they are governmental institutions that are not subject to the discipline of the market and ultimately are accountable to the citizens of their countries.” (Truman, 2008a).
According to Gordon (2010), the OECD guidance for recipient-country policies toward SWFs that evolved from these discussions reaffirms long-standing OECD investment principles (e.g., openness, nondiscrimination, and transparency) and provides guidance on how national security concerns should be handled and not be seen as a veiled form of protectionism. Follow-up on discussions suggested peer monitoring (e.g., the IFSWF practices, which are mostly ineffective) and closer examination of whether foreign state immunity leaves gaps in legal accountability. Basically, the OECD Guidelines provide a framework for continuing discussions and country-level actions.
Lee (2009) is less subtle, calling the Santiago Principles a ‘thin’ financial rule of law, noting they and the OECD Declaration on SWFs cannot even be labeled “soft law” because they were issued by specific interest groups of states. The language, terms like ‘principles’ and ‘practices,’ suggest informality and flexibility, not ‘code’ or ‘regulations’ which suggest hard rules or law. They form a ‘soft and unenforceable framework’ for the ‘facilitation of the understanding and implementation of the principles,’ absent a central regulator or enforcer. Frynas (2017) also notes the low level of compliance and general ineffectiveness of the Principles as a means of assuring transparency. Haberly (2011) to paraphrase, describes the Santiago Principles as a reflection of the prevailing neoliberal ideological preferences, and only that. They are not necessarily in the interest of the state, the SWF, or firms involved. They form only a broad framework and process for recipient and home country to reach a common understanding and practice.
On the other hand, some question even the need for regulations aimed at SWFs, in particular. Kratsas and Truby (2015) provide a broad overview and discussion of regulatory options. They also provide a rationale for a self-regulatory body of peers, like the IFSWF and the Santiago Principles (GAPP) (see pp. 36–40) as an alternative to country-by-country regulations or a new international regulatory body. While generally supporting this option, they conclude, however, that the IFSWF and members have not fulfilled that role. In 2010, the compliance ratio for the principles ranged from about 15% for Libya to over 95% for New Zealand, for those countries that reported.33 Since membership is voluntary and reporting is voluntary, there is no effective external regulatory check on the activities of SWFs. Again, the heterogeneity of SWFs is notable. What incentive do the governments of major SWFs have to subject themselves to additional international law? Individual governments must respond in their own interest as international discussions have yielded only voluntary, and, therefore, marginally effective, guidelines.
Overall, serious issues regarding SWF performance and intentions are widely recognized. The Santiago Principals themselves are dated, and the lack of compliance yields them ineffective. In fact, twenty noted scholars issued a “Call for Action” via Global SWF (2023) for a re-examination of the Principles and suggested third-party monitoring. Still, there is no obvious enforcement mechanism and little political support for such. In fact, Cohen (2009, p. 726) calls most ideas for reform, like the formation of a hypothetical international organization, a “World Investment Organization” like the World Trade Organization, a mirage. Individual country incentives do not align. He suggests simply international agreement on definitions, risk assessment methods, and dispute resolution would be a major accomplishment.
6. Domestic Origins of SWFs: Cultural, Political Determinants, and Socio-Economic Costs and Concerns
The first generation of SWFs discussed in Section 1 were created primarily to manage extraordinary revenues from commodity-based exports and moderate the negative effects of relative price movements that would disrupt other sectors of the economy. Their purpose has expanded, and the wave of new SWFs post-2000 tend to have broader investment and development objectives, often purely politically motivated. Thus, understanding the motivation of state governments to create SWFs or SIFs is important in evaluating their effectiveness and contributes to a better understanding of the variability in measures of transparency and performance. Bernstein et al. (2013) also emphasized the “mixed legacy” of SWFs as a key in understanding their mission and goals. In smaller developing economies, they were often seen as necessary to compete with the power of large multinational financial institutions, investors, and corporations. In autocratic countries, they represent the expansion of state power both domestically and globally. Aggarwal and Goodell (2018) illustrate the importance of culture in their analysis of the relationship between governance (individual components of the Santiago principles) and individual components of Hofstedt’s measures of culture. Braunstein (2017, 2018) emphasizes macroeconomic conditions and policies alone are not sufficient to explain the formation and activities of SWFs. Understanding domestic state–private sector relations and cultural norms is also critical. In his review of Gulf Coast countries, Kuwait, Bahrain, UAE (Abu Dhabi), and Qatar, strong royal families generally controlled the assets and direction of the economy, but, at the time of independence34, the structure of the private sector in each country differed and led to SWFs with different objectives. Kuwait, UAE, and Qatar had relatively weak domestic financial, construction, and trade sectors, which allowed a greater role of the state and early creation of SWFs, emphasizing management of savings and investment and development. Bahrain, on the other hand, had a relatively well developed, diversified private financial sector, and a smaller role for the state in domestic developmental finance. It was not until 2006 that the government of Bahrain created Mumtalakat to take a more active role in domestic economic development and diversification. Similarly, Singapore and Hong Kong have many common features as small open economies without natural resources, and both created SWFs, but they are very different in goals and behavior due to differences in domestic financial institutions and their interaction with private sector entities, inter alia.35
Thus, from a political-economy view, SWFs may take on three roles. They are instruments to assure domestic political stability or survival (a short-term goal of a less stable government); they maximize returns on investment and promote economic development (a long-term view of a stable government); and they are an instrument of foreign economic policy. The domestic political environment is a critical factor determining, tempering, or overriding economic policy objectives. The relative position of these varies by country with SWFs in well-regulated, free market democratic countries with strong institutions focusing on pure economic objectives (e.g., Norway) whereas in autocratic regimes the focus of SWFs may vary. Shih (2009) argues that in a highly unified autocracy, like Singapore, SWF resources are more likely to be directed to long-term economic growth. Whereas in a fragmented regime like China (in the early 2000s), the SWF may be an arena for political and bureaucratic infighting, leading to short-term gains for the leadership. Opportunities for corruption are more likely and, in fact, are not uncommon, as discussed below.
These examples illustrate Petrakis’ (2014) general argument that corporate governance is built on the foundations of national legislation and regulation. These, in turn, originate from the cultural norms of society (Petrakis, 2014, Chapter 5, inter alia). Poor governance and lack of transparency enable poor policies to be maintained and corruption to flourish. Similarly, Di Bonaventura Altuve (2024) argues, in a comparative analysis of Venezuela and Azerbaijan, that SWFs rarely fail or exhaust their assets because of macroeconomic shocks or crises. Rather, highly institutionalized regimes are more stable, less risky, and can pursue activities consistent with long-term economic development goals. SWFs in weakly institutionalized, less stable regimes are forced into short-term behaviors for political survival which are incompatible with long-term economic development goals and, therefore, are more likely to fail. External monitoring is not a solution. Frynas (2017) emphasizes external monitoring, like the Santiago Principles, is effective only if they are built on the foundation of strong domestic institutions.
While the cultural and socio-political foundations are important and may lead to different policies for development, the notion that SWF/government intervention at scale in the macroeconomy is beneficial is also debatable. Commodity-based SWFs simply convert wealth in the form of natural resources in the ground into wealth held in more traditional financial assets. The new, more “spendable” form of wealth may generate increases in spending and GDP, generally a positive outcome. However, the now-realized wealth of the SWF may enable the continuation of undesirable macroeconomic and financial policies to the long-run detriment of the country. Governments must still provide sound macroeconomic policies: fiscal, monetary, and exchange rate management.36 Market discipline could be lost, and governments could make political decisions with adverse long-run consequences because of the easy financing available if they can tap the SWF resources. The economic benefits may also be lost, if they existed at all. In fact, Aslund (2007) claims “sovereign wealth funds are often a lousy bargain for the countries that have them” and in democracies there is no justification for their existence (See Aslund, 2007).
There is a clear trade-off as the actions of a well-managed SWF with long-run economic development objectives as a goal may prove beneficial in economies with no or underdeveloped capital markets. However, these benefits are not assured. Raymond (2010), in an analysis of SWF interventions to support domestic financial institutions and equities markets during the global financial crisis, finds mixed results, e.g., interventions in 2008 by the Kuwaiti SWF were unsuccessful whereas those by the Qatari fund were successful in supporting the stock market, in the short run. Other examples he considered were medium-term loans to banks, rather than the typical short-term central bank loans. The SWFs effectively became an insurance fund for managing through financial crises.
An additional caveat regarding potential domestic benefits is potential corruption. Some SWFs have been the source of massive corruption schemes and illicit finance. Vittori and Kumar (2024) provide several examples of corruption, money laundering, and illicit financing of arms exports. Brown and Diamond (2024) provides a detailed description of the Malaysian sovereign investment and development fund, 1 MDB’s money laundering scheme, labeled the “largest kleptocracy case to date” by the US Justice Department in 2016. They detail the complicated network of participants, including Goldman Sachs, which received USD 280 million in fees for facilitating the early stage of the laundering. Several executives were convicted of violating the US Foreign Corrupt Practices Act for bribery, diversion of funds, and money laundering through a web of shell companies in a USD 4.5 billion scheme to fleece the Malaysian State Investment Fund. Goldman Sachs paid USD 3 billion in fines to the US and over USD 5 billion worldwide. The ex-prime minister received a ten-year prison sentence.37
To extend the argument, the existence of SWFs may create and empower a rentier class of political elites independent of the population and with no interest in economic growth or capital market development, per se.38 The government survives without the need for taxes upon the population to finance its activities and, therefore, has no need to provide accountability of its actions. The sometimes-destabilizing movements of free markets are of no concern as SWF distributions can smooth domestic fluctuations, pacify restless populations, and balance business and political interests to ensure regime survival. Trudelle’s (2022) social network analysis of distributions from Saudi Arabia’s Public Investment Fund indicates that funds flow to “family-owned conglomerates connected to merchant elites with long standing ties to the Saudi state” assuring support for the ruling elite. Further, given the anti-Western attitudes of some countries’ populations, Europe and the US may be less inclined to promote democracy in authoritarian states if the state is friendly and has the financial wherewithal to continue in power.
While macroeconomic policies may be altered by the existence of SWFs, the management of the SWF in and of itself may cause even more serious issues regarding the efficiency with which resources are used, the pattern of economic development, and social and economic disruptions, legal or otherwise. SWFs are very heterogeneous and many lack clarity in their organizational structure, have ill-defined governance mechanisms, lack accountability and transparency and suffer from poorly designed or non-existent financial management policies. The lack of independent auditors or published annual reports and, therefore, very opaque balance sheets leaves room for behavior that may be questionable. For these, neither the domestic population nor international partners or foreign governments trust the actions of SWFs.39 Critics suggest they are a major source, or even the principal source, of graft and corruption in their respective economies. The claims that SWFs lead to an inefficient distribution of financial assets and, therefore, lower rates of growth in GDP or other measures of economic well-being must be taken seriously.40
7. Implications and Consequences of the Lack of Transparency and State Ownership: Commercial Advantages, Political Motives, and National Security Issues
Underlying Western economies is free enterprise and the efficiency of markets in allocating goods, services, and factor inputs, including capital. The belief that markets can allocate resources more efficiently than governments is fundamental, and the role of the government is to maintain the legal system, intervening for the public good and developing industrial policies for the long-term public good and national security. By endowing states with the financial power embodied in sovereign wealth funds, these foreign governments become actors in the recipient-country’s domestic economy and then have the power to influence markets, distort the competitive allocation of resources from their best market-determined use and provide opportunities for corruption at massive scale. Thus, the most basic assumptions about the functioning of western economies and the international financial system are challenged (See Kimmitt, 2008; Slawotsky, 2009). The inherent dangers of state organizations acting without transparency in the capital market of free market economies relate both to economic activities with potential anticompetitive impact and outright political goals benefiting the SWF home country and threatening or supporting the recipient countries. Investments are not simply the free movement of capital but here are dictated by national goals, not the economic returns that motivate the typical investor. By this reasoning, SWFs are a structural threat to market integrity and potentially the national security of a recipient country. The national security threats have long been recognized (See Thatcher, 2012) and, if anything, are greater now. The new international “balance of financial power” is a serious concern.
There is a wide range of concerns, some even regarding the most well-managed, most transparent sovereign wealth funds. The Norwegian model is often considered the best one, in which the ownership interests of the government are separated from the economic activities of the fund, i.e., “public ownership, but effectively privately operated.” Notably it does not invest in domestic assets, only foreign, and on a global scale, with 70% of the portfolio in equities. But early on, Backer (2009, p. 1272) argued “… Norway is consciously pursuing state policy indirectly through its funds. Investment is clearly meant to project Norway’s political power by other means, and to move policy in particular directions…”. The Norwegian fund seeks to maximize wealth, but rather than investing in benchmark indices dictated by the efficient markets hypothesis they also, like private funds, look for market aberrations and seek ‘excess returns’ subject to strong explicit ‘ethical guidelines.’41 As a result, the Norwegian Fund, like private funds, over the years become entangled with Norges Bank Investment Management (2025) movements advocating corporate social responsibility guidelines, sanctions against Israel, and prohibitions against investment in Burma, for example. More recently, they divested from fossil fuels firms and Russian company shares as a result of the Russian invasion of Ukraine. Notably, they were clear and transparent in their actions. At best we would expect the funds to be influenced in ways similar to ways in which private funds are influenced and act accordingly, i.e., the route of traditional shareholder activism, but the primary shareholder is a government entity. In many ways, this is benign in terms of national security issues, but clearly domestic political considerations come into play. However, at the level of a recipient firm, the lack of transparency of SWFs may have spillover effects on firms that SWFs invest in. While the effects may be unclear, Chen et al. (2025) find that SWF investees may make greater efforts to improve corporate responsibility. However, these issues are trivial in comparison to direct commercial advantages or national security challenges.
7.1. Direct Financial and Commercial Impacts
Concerns reach far beyond traditional public interest group or shareholder activism affecting individual firms. Significant direct commercial advantages for individual companies in a SWF portfolio may also arise. There is the potential for a perceived or actual unfair competitive advantage relative to the private sector. With a sovereign guarantee, explicit or implicit, portfolio firms may be able to obtain financing rates (or bailouts) not available in the private market. Further, access to foreign exchange may be facilitated or may be funneled through domestic enterprises which then invest abroad. Or, perhaps more dramatically, a portfolio company may benefit from business information gained by the intelligence services of the home country. Intelligence “cross-pollination” may benefit the SWF home country.
As the Norwegian Fund, the most transparent example, demonstrates, SWFs could and do employ large pools of capital in non-commercial ways that are politically sensitive, to promote a foreign policy objective, even if not an explicit national security threat. Less transparent autocratic SWFs act in ways more directly aligned with the national interests of their government or even with the assistance of other government agencies. For example, a simple case would be for the SWF to pressure a portfolio company to open a production facility in the home country to create jobs.
Early on, Slawotsky (2009) argued that SWFs will no longer be passive investors, but are becoming more active owners of large “flagship” international companies that will “allow them to influence corporate boards in dramatic ways, radically transforming corporate governance.”42 It is not necessary for a SWF to take active control of a company, but a board seat or outsized voting rights could provide leverage to influence firm activities.43. While the potential for takeover of specific firms and potential market disruptions—for the products or resources that these firms produce—are real, the influence of SWFs and their home-country governments may be much more subtle. Just the threat of withdrawal, explicit or implicit, could be sufficient to cause a portfolio firm or the firm’s government to alter its behavior. Kamiński (2017) argues that China’s SWFs have invested heavily in European energy companies, have gained valuable insights from their board representatives that may be shared with Chinese competitors, and also provides indirect political influence over European energy policies. These concerns become clouded by those who consider any investment by a Chinese firm as an extension of state policies whether it is via a SWF or not. Given the potential advantages for the SWF and home-country government policy gains, is there any beneficial effect for the recipient of SWF investments?
In an early study, Dewenter et al. (2010) examine 47 transactions in which SWFs, mainly the Norwegian and Singapore funds, acquire a significant position in listed firms. They found that there was a significant positive return to announcements of SWF purchases. SWFs were active investors, rather than passive, as others suggested, with more than half of the “firms experiencing one or more events indicative of SWF monitoring or influence.”44 They also provide evidence that the Truman Transparency Score is positively related to post acquisition stock performance.
Megginson and Fotak (2015) provide a broad survey of SWF issues including the effects of SWF investments on target firms. The general result for five papers reviewed45 was that excess returns due to the announcement of SWF equity investment was 1–3%. For those papers that also studied long-term returns, they found negative excess returns. Karolyi and Liao (2011) and Bortolotti et al. (2015) also found that the SWF announcement excess returns were less than that found when announcements by similar privately owned institutional or corporate investors were made, i.e., there was a “SWF discount.”
On the other hand, in a comparison of private companies’ vs. SWFs acquisitions, Wang et al. (2021) finds that adversarial relationships between the SWF home country and the acquisition home country hinders acquisitions, and cooperative relations helps acquisitions. They suggest that geopolitical concerns may actually moderate the SWF activities vis-à-vis those of private firms. But again, this clearly identifies political factors as an underlying motivation of SWF activities.
Added to this threat is the potential for SWF activities to disrupt national capital markets or more readily, the value of an individual stock. Sudden changes in portfolios by a major SWF or a group of aligned SWFs may disrupt the market with consequent real economic effects that may also have political effects, such as changing election outcomes. While during the global financial crisis SWFs also made large investments in distressed financial institutions, stabilizing some of the firms, but taking large reductions in their own portfolio values just as other participants did.46 Nonetheless, if they take large, opaque positions and markets are illiquid then their actions, or even rumors of their actions, can increase volatility. The evidence is very case-by-case specific and often contradictory. Beck and Fidora (2008) examine major portfolio changes in the Norwegian SWF and find no evidence “for a stock price impact of non-commercially motivated stock sales by the Norwegian Government Pension Fund”.47 However, Drezner (2008) notes the economic turmoil resulting when the Norwegian Government Pension Fund shorted several financial sector stocks in Iceland, which then affected the entire economy. Again, while Rose (2008a, 2008b) and Kimmitt (2008) argue that they are generally passive investors, they are sovereign actors, designed to maximize the interests of their state, and the lack of transparency may readily conceal their motives.48 To be re-iterated though, SWFs are very diverse. The beneficial actions of some SWFs do not alleviate the caustic actions of others.
7.2. National Security Issues and Political Motives
There are a host of national security issues that also arise. One set of issues involves the transfer of science and technology via corporate board actions. For example, transferring engineering studies and blueprints from a portfolio company to a domestic one as part of a joint venture or production agreement is a much more direct transfer than the reverse engineering required by the purchase of goods and services subject to the Wassenaar Arrangement (successor to COCOM) review as in the past.49 The SWF pursuing national objectives may take positions in many firms in a critical sector. Haberly (2011) provides an innovative network analysis of the Mubadala Development Company’s (one of Abu Duhbai SWFs) strategic investments in the aerospace and semiconductor industries.50 In the case of semi-conductors, Mubadala saved AMD from bankruptcy by acquiring a 20% stake. Then, the basic foundry level chip making was transferred to GlobalFoundries followed by acquisition of production facilities from IBM and other companies. Research and training relationships with leading organizations were then established. GlobalFoundaries became a global player, the third largest (by revenues) manufacturer of specialty process semiconductors. While Abu Dhabi has acquired sensitive dual-purpose technologies, these have not yet significantly benefited the domestic economy, similarly for aerospace.
These investments clearly involve international strategic objectives. Even if not overt, Slawotsky (2009) notes that international antagonisms may lie dormant during times of prosperity, but economic stress brings them to the surface, and purposeful actions of SWFs may damage the interests of an antagonist. Examples include the dispute between Russia and Ukraine over natural gas and the sudden reduction in energy supplies to the Czech Republic when the Czechs agreed to host anti-missile radar facilities. While these actions were by Gazprom, a Russian firm,51 sovereign wealth funds can easily exert similar pressures via the portfolio firms in which they have influence. And, the purchase of a company connected with the Prime Minister of Thailand by Singapore’s Temasek was a key trigger of the coup in 2006.52 China’s hostile actions toward Taiwan are similar to those of Russia’s.53
A third issue concerns the actions of the portfolio (or recipient) country’s government. For political reasons, the recipient-country government may take actions that favorably affect the holdings of a foreign SWF and benefit the SWF state.54 For example, Calluzzo et al. (2017) using campaign finance data in the US find evidence that SWFs are attracted to campaign finance firms and firms in industries that may be vulnerable to legislation inhibiting foreign investment, clearly illuminating potential political motives for SWF actions in the US. Drezner (2008) though, clearly distinguishes between SWFs of democratic governments, which are more transparent and likely to act in a slower, predictable fashion, and those of authoritarian governments, which may act quickly and without recourse of the electorate.
Early on, Cohen (2009) discussed the important economic role SWFs play in global capital markets, noting, however, that the significance of each individual transaction must be evaluated under the umbrella of SWF country political objectives. These micro-level concerns are manifestations of Lenihan’s (2014) global view. Simply put, the very existence of a SWF “may be to fulfill a politically motivated purpose as part of a state’s larger grand strategy to enhance their economic power relative to another state or set of states” (p. 246). Effectively, a SWF is a sovereign actor and it will seek to maximize or protect the economic power of its state and in the end must be seen as such. As non-military geo-economic competition grows in importance, SWFs provide a vehicle to exercise that power.55 They “are not only powerful financial actors… [but] also offer the state a means through which they can channel economic forces to their advantage” presently and influence “the future balance of power within the international system” (p. 246).56 Given that most sovereign wealth fund resources are in developing or resource-based economies, the relative position of developed economies is challenged. Haberly (2011) also emphasizes that South–North investments via SWFs are targeted and leveraged to establish and extend global alliances of strategic importance for national economic development, often in cooperation with other state-owned enterprises. An example is the fully state-owned COSCO’s acquisition of ports across Europe and the world (See Areddy et al., 2025).
8. Policy Responses to Commercial Advantages and National Security Challenges
There is often a clear conflict between SWF (and their government’s) investment policies and target-country national security issues, and, as a result, there have been three general responses on the part of recipients of SWF investments. First, there is a general call by recipient countries for greater transparency of activities, clearly defined and monitored corporate governance, and better measures of the impact of their behavior, at a minimum as if the SWF were a private sector firm (an investment company or mutual fund company).57 Second is a call for improved regulation and greater scrutiny of SWF activities in the recipient countries, again, at least as if it were a privately held firm. And third, there has been a re-examination of existing national security mechanisms bringing greater awareness to potential SWF actions. All assume that the accumulation of assets by sovereign wealth funds is appropriate to begin with, which is debatable in itself, particularly in democratic, developed market economies. Because of differing views policy responses have been different.
8.1. Greater Recipient-Country Regulation and Oversight
The debate is typically framed as SWFs facilitate the free movement of capital vis-à-vis they pose a threat to national security. In general, most observers begin with the positive aspects of facilitating international capital flows and the general positive behavior of SWFs but usually conclude that the lack of transparency for many funds arouses suspicions that are difficult to allay. Many argued during the early period when the IFSWFs was formed, that self-regulation is the best option. Feng (2009), for example, provides an overview of SWF activities and a review and history of US regulations. At that time, he concluded self-regulation would be the best choice, but, of course, that has not happened, and the international legal framework surrounding their actions is not effective, and individual countries have acted independently. Gilson and Milhaupt (2008) also propose a simple corporate governance solution: make shares of a firm acquired by sovereign entities non-voting. Their fear is that additional regulation may lead to investment protectionism and a reduction in the efficiency of global capital markets. Nonetheless, Thatcher (2012) finds the US has generally imposed more restrictive or stronger legislative monitoring of SWFs when compared to policies of the UK and Europe.58
Rose (2023a) provides a recent comprehensive overview of regulatory issues for SWFs and SIFs: legitimacy and accountability, corruption and waste, politicization, and the negative political and financial spillovers. While regulatory and legal solutions are discussed, mainly within the context of existing US laws, all depend on the fundamental transparency of the SWF (and SIFs). As expected, the response of each of the many recipient countries has varied, but the US framework on investment policies and national security issues and the OECD guidelines for treatment of SWFs by recipient countries may both be representative. In the US framework, there are two distinct areas of concern: (1) the size of ownership in publicly owned firms and (2) national security issues. Regarding size of investments, there is a long-standing body of law relating to the size of ownership of public firms that must be publicly acknowledged. Currently an acquisition of more than 5% of a publicly owned corporation requires a 13(d) of the Securities Exchange Act of 1934 filing (Securities Exchange Act, 1934). However, SWFs do not have to meet the more stringent requirements of registered investment companies. Investment disclosure, then, is up to the individual SWF and these policies vary considerably, as Truman’s scoring clearly indicates. In addition, multiple aligned SWFs may own just less than 5% ownership and thus avoid the filing requirement.
Slawotsky (2009) argues that the inherent dangers of sovereign ownership of domestic firms should require that all holdings of SWFs from the same country, and all holdings of SWFs of aligned (explicit or tacit) countries (e.g., OPEC or GCC countries), should be aggregated and treated as one and new thresholds applied.59 The number of distinct SWFs varies by country. The UAE and sub-national government units have nine SWFs, and Singapore has two (Truman, 2010, p. 16). There is great variation in the investment strategy of SWFs as well. China’s Chinese Investment Corporation manages over a trillion USD, investing heavily abroad, and has a TTS of 74. Whereas China’s SAFE Investment Company also manages over a trillion USD and is unscored by Tuman and has a LMTI of 2. The Government of Singapore Investment Corporation GSIC), manages USD 847 billion for the Singapore government and invests predominately abroad, while Temasek Holdings, focuses on investing in emerging Asia, has about USD 295 billion with about two-thirds invested abroad.60 The varying number of SWFs in different countries, diverse investment strategies, and legal ownership status complicate a recipient country’s perceptions and response to SWF investments.
Another related concern, hardly acknowledged or addressed, is the actions of agents of sovereign wealth funds. For example, in February of 2011, it was reported that the China Investment Corporation (CIC) and the State Administration of Foreign Exchange (SAFE) employed a company called “SSBT OD05 Omnibus Account Treaty Clients” to invest USD 19.4 billion in seven major Japanese companies. This obscure company was listed as one of the top ten holders of each of the Japanese companies.61 A similar “distant owner” transaction may involve a company that is a joint venture outside the boundaries of one of the joint venture partners that may be providing advanced technology. The joint venture itself then may receive SWF investments that could influence the activities of the joint venture with regard to technology transfer, production decisions and so forth.62 When the joint venture’s host country has weak monitoring practices and the technology provider’s home country is too far removed to effectively monitor the use of the technology, sensitive transactions may take place unnoticed.
Despite the conflict between welcoming investment policies and national security issues and the lack of transparency and potential political behavior, Epstein and Rose (2009) argued that new regulation was not necessary (at that time). The “nightmare scenarios” that critics of SWFs warn against are unlikely and if they occur will be identified by existing laws—either existing business regulation of securities and antitrust or national security laws. For the US, the Foreign Sovereign Immunities Act, or any existing international law, does not provide immunity from existing US law. Specific national security concerns are addressed in several ways (See Lee, 2009). Three acts generally address foreign investment and national security issues in the US: the Defense Production Act of 1950 (Defense Production Act, 1950), the Exxon Florio amendment in particular, the Foreign Investment and National Security Act of 2007 (Foreign Investment and National Security Act, 2007), and the Foreign Investment Risk Review Modernization Act of 2018 (Foreign Investment Risk, 2018). The National Defense Authorization Act of 2021 (National Defense, 2021) does not regulate foreign investment but does require the US Department of Defense to identify foreign military firms.
The Foreign Investment and National Security Act of 2007 (FINSA) (Foreign Investment and National Security Act, 2007) requires additional scrutiny and higher-level clearances for transactions that may result in a foreign entity controlling a company engaged in interstate commerce.63 These investments are reviewed by the interagency Committee on Foreign Investment in the US, CFIUS, which is designed to review investments in a way that assures national security issues are addressed without hindering participation in US capital markets.64 The CFIUS may block a transaction or require mitigation. For example, require that the SWF remain passive or the recipient company withhold sensitive information from the SWF investor. But what type of transactions should be scrutinized?
Moran (2009) identifies three distinct threats that the CFIUS must, in his view, focus upon: (1) any acquisition that would lead to US dependency on a foreign supplier of goods or services who may delay, deny, or place conditions upon the provision of those goods, (2) any proposed acquisition that would transfer technology or expertise to a foreign government that may then use it to harm the US, (3) any acquisition that would insert a means for infiltration, surveillance or sabotage (human or otherwise) in goods and services crucial to the functioning of the economy. He concludes that while the vast majority of foreign transactions pose no risk, cases on the margin are likely to remain problematic.65 Hindelang and Pohl (2023) note that there “is not a common set of principles for assessing risks and threats to national security that may be posed by FDI and balancing those risks and threats against the economic interests of private parties concerned and society at large.” As a result, and because recipient-country regulation varies widely, it is difficult to analyze whether instruments of foreign investment control are effective tools of international economic statecraft. This remains an unsettled question.
In Europe, the issues are taken up by the EU and the OECD. The EU Foreign Direct Investment Screening Regulation of 2019 (The EU Foreign Direct Investment Screening Regulation, 2019) provides a framework for screening on the basis of national security and public interest.66 It provides an EU-wide mechanism for sharing information as both the EU and individual countries screen investments, with the individual country making all final decisions.67 The same processes apply to SWFs with emphasis on transparency and governance.
8.2. Investment Screening vs. Investment Protectionism
While recipient-country national security concerns are legitimate, many argue that there are sufficient legal tools to address these issues without intruding into investment policy issues. The OECD initiated a lengthy review of issues under the Freedom of Investment Process in 2006 and issued several reports including the OECD Guidelines for Recipient Country Investment Policies Relating to National Security approved by the governments in 2008, designed to prevent investment protectionism, and ensure that SWF investments are received in a non-discriminatory fashion. The OECD framework for host-country treatment of SWFs argues that SWFs should be regarded just as other institutional investors, complying with OECD Investment Guidelines requiring adherence to the principles of transparency, non-discrimination, liberalization, and standstills. These have been regularly updated.68 In addition, transparency/predictability, regulatory proportionality, and accountability of recipient-country treatment of SWF activities are also emphasized. Here, recipient-country transparency/predictability requires “codification and publication of laws regarding investment, prior notification to interested parties about plans to modify investment strategies, consultation of these strategies with other counterparts and the disclosure of investment policy actions.” The regulatory proportionality principle requires that recipient-country restrictions on investment should not be greater than is needed to ensure national security.69 And, the accountability principle is a mechanism to guarantee periodic regulatory impact assessments, parliamentary oversight, and other supervisory activities.70 OECD countries, including the US, readily meet nearly all aspects of these principles in general, but take widely varying routes to do so.
With respect to investment protectionism, issues regarding sovereign wealth fund investments are well understood but SWF home-country, as well as recipient-country, policies vary substantially. The root cause of concerns remains the lack of transparency and accountability of SWFs and the extent they are utilized as a vehicle for financial statecraft.
9. Summary and Conclusions
Most sovereign wealth funds convert natural resource wealth into more “spendable” financial assets for the benefit of the home country, broadly defined. As a group they are very heterogeneous and have differing goals and objectives. Their actions may accelerate domestic development programs and provide resources for future generations. As global investors, they facilitate the flow of international capital. However, as sovereign entities, their actions may be politicized, disrupting market-determined resource flows, be anticompetitive, and threaten the national security of host countries. These actions are all essentially incompatible with the principles of democratic free market economies. Further, the level of transparency varies, with autocratic regimes being less transparent, and the lack of transparency and accountability for many SWFs arouses suspicions of all SWFs. The lack of transparency also provides an opportunity for corruption at massive scale.
While there have been discussions of the formation of an international regulatory body for decades, there has been no real progress. The Santiago Principles, created by the International Forum for Sovereign Wealth Funds (IFSWF), are widely recognized guidelines but are voluntary, as is membership in the IFSWF itself. The Principles are dated and not enforceable and individual country incentives do not align to enable external regulatory compliance. Given the significant domestic cultural, socio-economic, and political systemic differences that provide the foundation for governance and accountability, persistent differences in transparency and governance between free market democratic countries and autocratic countries appear unresolvable. The highly varying objectives of individual SWFs compound attempts for international regulation. Bilateral state power relations will dictate the role of SWFs with respect to individual firm or sectoral investments vis-à-vis partner countries. Cohen (2009) argued that an international regulatory organization is not feasible; simply a mirage. A forum to provide generally accepted definitions, risk assessment methods, and dispute resolution would be the likely best outcome for global observation and monitoring of SWF activities followed by individual country enforcement actions. As a result, host-country domestic regulations are essential and will vary widely from country to country and over time depending on international politico-economic relationships, with political considerations becoming more important. Despite the benefits of facilitating international capital mobility and economic development, the lack of transparency and accountability masks the potential for disruptive, anti-competitive behavior, national security threats, and corruption. Real economic and national security threats remain, and individual countries must be diligent in maintaining their own security interests when assessing the potential benefits of SWF investments and acquisitions.
Funding
This research received no external funding.
Institutional Review Board Statement
Not applicable.
Informed Consent Statement
Not applicable.
Data Availability Statement
The raw data supporting the conclusions of this article will be made available by the author on request.
Acknowledgments
Some of the original research for this paper appeared in Kemme (2012) which was funded in part through a grant provided by the United States Department of State’s Title VIII Program and administered by the University of Delaware. I would like to thank Tulasiram Nepal for helpful research assistance in the revision of this paper and anonymous referees for helpful comments and suggestions.
Conflicts of Interest
The author declares no conflict of interest.
Appendix A
Table A1.
50 largest (AuM) Sovereign Wealth Funds. This table provides fundamental information on the 50mnlargest SWFs based on assets under management. Estimates of assets undermanagement by SWFI, Global SWF and the SWF itself, when available. In addition, for transparency the Tuman SWF Scoreboard (TTI), the Linaburg–Maduell Transparency Index (LMTI) and the GSR Score are reported. Country characteristics, the Democracy Index, and the Autocracy Score are reported. Details are provided in the notes to this table.
Table A1.
50 largest (AuM) Sovereign Wealth Funds. This table provides fundamental information on the 50mnlargest SWFs based on assets under management. Estimates of assets undermanagement by SWFI, Global SWF and the SWF itself, when available. In addition, for transparency the Tuman SWF Scoreboard (TTI), the Linaburg–Maduell Transparency Index (LMTI) and the GSR Score are reported. Country characteristics, the Democracy Index, and the Autocracy Score are reported. Details are provided in the notes to this table.
| Rank (Assets Under Management) | Sovereign Wealth Fund | Country | Estimated or Reported Assets (USD Billion) | Transparency Indices | Country Characteristics | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| SWFI (2025) 1 | Global SWF (2025) 2 | SWF Itself, Circa (2023–2024) 3 | Truman SWF Scoreboard, 0–100 (2019) 4 | Linaburg–Maduell Transparency Index, 0–10 (2024) 5 | GSR Score, 0–25 (2024) 6 | Democracy Index 0–10 (2024) 7 | Autocracy Score 0–10 (2018) 8 | |||
| 1 | Norway Government Pension Fund Global | Norway | 1739 | 1743 | 1739 | 100 | 10 | 24 | 9.81 | 0 |
| 2 | China Investment Corporation | China | 1332 | 1332 | 1330 | 74 | 7 | 20 | 2.11 | 7 |
| 3 | SAFE Investment Company | China | 1090 | 1358 | NA | NA | 2 | 4 | 2.11 | 7 |
| 4 | Abu Dhabi Investment Authority | UAE | 1058 | 1110 | NA | 65 | 6 | 14 | 3.07 | 8 |
| 5 | Kuwait Investment Authority | Kuwait | 1029 | 969 | NA | 70 | 6 | 10 | 2.78 | 7 |
| 6 | Public Investment Fund | Saudi Arabia | 925 | 925 | 765 | 39 | 6 | 24 | 2.08 | 10 |
| 7 | GIC Private Limited | Singapore | 801 | 847 | NA | 64 | 7 | 16 | 6.18 | 4 |
| 8 | Badan Pengelola Investasi Daya Anagata Nusantara | Indonesia | 600 | NA | NA | NA | NA | NA | 6.44 | 0 |
| 9 | Qatar Investment Authority | Qatar | 526 | 524 | NA | 46 | 5 | 18 | 3.17 | 10 |
| 10 | Hong Kong Monetary Authority Investment Portfolio | Hong Kong (China) | 514 | 526 | NA | 70 | 8 | 22 | 5.09 | NA |
| 11 | National Council for Social Security Fund | China | 414 | 424 | NA | NA | 5 | 8 | 2.11 | 7 |
| 12 | Investment Corporation of Dubai | UAE | 341 | 380 | NA | 64 | 5 | 14 | 3.07 | 8 |
| 13 | Mubadala Investment Company | UAE | 302 | 330 | 302 | 75 | 10 | 23 | 3.07 | 8 |
| 14 | Temasek Holdings | Singapore | 288 | 288 | 291 | 79 | 10 | 25 | 6.18 | 4 |
| 15 | Turkey Wealth Fund | Turkey | 279 | 190 | 320 | 68 | 6 | 19 | 4.26 | 4 |
| 16 | Abu Dhabi Developmental Holding Company | UAE | 225 | 225 | NA | 65 | 5 | 18 | 3.07 | 8 |
| 17 | Korea Investment Corporation | South Korea | 189 | 207 | 189 | 85 | 8 | 23 | 7.75 | 0 |
| 18 | National Development Fund of Iran | Iran | 157 | 162 | 132 | 56 | 4 | 13 | 1.96 | 7 |
| 19 | Future Fund | Australia | 150 | 204 | 180 | 87 | 10 | 22 | 8.85 | 0 |
| 20 | National Welfare Fund | Russia | 133 | NA | NA | 51 | NA | NA | 2.03 | 5 |
| 21 | Emirates Investment Authority | UAE | 91 | 102 | NA | 36 | 3 | 7 | 3.07 | 8 |
| 22 | Samruk-Kazyna | Kazakhstan | 81 | 79 | 81.17 | 64 | 10 | 18 | 3.08 | 6 |
| 23 | Dubai Investment Fund | UAE | 80 | 80 | NA | NA | NA | 18 | 3.07 | 8 |
| 24 | Brunei Investment Agency | Brunei | 73 | 65 | NA | 30 | 1 | 2 | NA | |
| 25 | State Oil Fund of Azerbaijan | Azerbaijan | 60 | 60 | 49.03 | 92 | 10 | 7 | 2.8 | 7 |
| 26 | Kazakhstan National Fund | Kazakhstan | 56 | 65 | 55.7 | NA | 2 | 4 | 3.08 | 6 |
| 27 | Oman Investment Authority | Oman | 50 | 50 | 50 | NA | 4 | 14 | 3.05 | 8 |
| 28 | New Zealand Superannuation Fund | New Zealand | 48 | 46 | 43.14 | 94 | 10 | 25 | 9.61 | 0 |
| 29 | Ethiopian Investment Holdings | Ethiopia | 45 | 46 | NA | NA | 5 | 8 | 3.24 | 2 |
| 30 | Libyan Investment Authority | Libya | 40 | 68 | 68.4 | 23 | 4 | 13 | 2.31 | NA |
| 31 | Khazanah Nasional | Malaysia | 36 | 32 | 30.68 | NA | 6 | 18 | 7.11 | 7 |
| 32 | National Wealth Fund, UK | UK | 36 | 36 | 34.75 | NA | NA | NA | 8.34 | 0 |
| 33 | CNIC Corporation Limited | Hong Kong (China) | 33 | NA | NA | NA | NA | NA | 5.09 | NA |
| 34 | Hong Kong Future Fund | Hong Kong (China) | 28 | NA | NA | NA | NA | NA | 5.09 | NA |
| 35 | Beijing State-Owned Assets Management Co., Ltd. | China | 28 | NA | NA | NA | NA | NA | 2.11 | 7 |
| 36 | Russian Direct Investment Fund | Russia | 25 | 28 | NA | 37 | 7 | 4 | 2.03 | 5 |
| 37 | Nuclear Waste Disposal Fund | Germany | 23 | 26 | 24.91 | NA | NA | 24 | 8.73 | 0 |
| 38 | Fund for Reconstruction and Development of Uzbekistan | Uzbekistan | 23 | NA | 23.61 | NA | NA | 4 | 2.1 | 9 |
| 39 | Azerbaijan Investment Holding | Azerbaijan | 22 | 37 | NA | 92 | NA | 7 | 2.8 | 7 |
| 40 | Polish Development Fund | Poland | 20 | 20 | NA | NA | NA | 16 | 7.4 | 10 |
| 41 | Mumtalakat Holding | Bahrain | 18 | 18 | 16.8 | 55 | 10 | 12 | 2.47 | 10 |
| 42 | Malta Government Investments | Malta | 17 | 2 | NA | NA | NA | 3 | 7.93 | NA |
| 43 | Timor-Leste Petroleum Fund | Timor-Leste | 17 | 19 | 18.91 | 91 | 9 | 12 | 7.03 | 1 |
| 44 | Revenue Regulation Fund | Algeria | 16 | NA | 26 | 1 | NA | 3.55 | 1 | |
| 45 | Ireland Strategic Investment Fund | Ireland | 16 | 19 | 15.09 | 85 | 8 | 25 | 9.19 | 0 |
| 46 | Sociedad Estatal de Participaciones Industriales | Spain | 15 | NA | 17.23 | NA | NA | NA | 8.13 | 0 |
| 47 | The Sovereign Fund of Egypt | Egypt | 12 | 2 | NA | NA | 4 | 11 | 2.79 | 4 |
| 48 | Sharjah Asset Management Holding LLC | UAE | 10 | 3 | NA | NA | NA | 6 | 3.07 | 8 |
| 49 | Future Ireland Fund | Ireland | 9 | NA | NA | NA | NA | NA | 9.19 | 0 |
| 50 | Maharlika Investment Fund | Philippines | 9 | NA | NA | NA | NA | NA | 6.63 | 0 |
| Median Value | 58 | 80 | 62 | 65 | 6 | 14 | 3 | 7 | ||
Note: Only national level funds are included. 1,2,3 Total asset values for SWFs are obtained from the Sovereign Wealth Fund Institute, Global Sovereign Wealth Fund (GSWF), as well as from SWFs’ annual reports and official websites. SWF rank is based on assets under management as reported by the Sovereign Wealth Fund Institute (SWFI). 4 The Truman SWF Scoreboard is provided by the Peterson Institute for International Economics. It ranges from 0 to 100. The Truman SWF Scoreboard is from 2019, the last date available. 5 The Linaburg–Maduell Transparency Index is from SWFI. It ranges from 0 to 10 and the last date available is 2024. 6 The Governance, Sustainability, and Resilience (GSR) Index is from the Global Sovereign Wealth Fund (GSWF). It ranges from 0 to 15 and the last date available is 2024. 7 The Democracy Index is from the Economist Intelligence Unit. It ranges from 0 to 10 (most democratic) and 2024 is reported here. 8 The Autocracy Score is from the Center for Systemic Peace and ranges from 0 to 10 (most autocratic). Data and scores used from SWFI and GSWF were retrieved from their websites on 22 March 2025.
| 1 | For the 50 largest SWFs (narrowly defined) listed in the Appendix A, assets under management estimated by Sovereign Wealth Fund Institute. Note, other individuals and institutions also estimate assets under management but the SWF definitions and samples, inter alia, varies. |
| 2 | See Kuwait Investment Authority (2025). There were much earlier special purpose funds or trusts but none are comparable in scope or scale to KIA. Also many authors mention sub-national state or provincial funds, e.g., state level public school or university funds in the US, but we focus only on national level funds herein. |
| 3 | |
| 4 | See Rose (2023b, Table 1) for details of ten major investments of SWFs in the US, mainly financial sector firms, in 2007 and 2008. See also Černohorský and Tesnerová (2020, Figure 3). In the end some investments proved ill advised. For actual earnings and financial peromance of SWFs see regular reports by Preqin, like Preqin (2023). |
| 5 | See Divakaran et al. (2022) and chapters therein for description and analysis of SIFs, their definition and distinctions from SWFs. |
| 6 | |
| 7 | See Megginson and Gao (2019) for a recent review of research on sovereign wealth funds and earlier works by Megginson for regular reviews. Also see Ouni et al. (2020b). |
| 8 | For example, see Megginson et al. (2023) which includes a brief survey and analysis of how SWFs invest assets geographically and across asset classes. Also see the Special Issue in Volume 6 of the Journal of International Business Policy (2023) for several papers on SWF issues. Most of the papers there are cited throughout this paper. |
| 9 | Bahoo et al. (2020) analyzes 184 articles. The focus is more on bibliometric techniques, author contributions and so forth, rather than concrete analyses of SWFs. Mami (2023) focuses more on identifying research themes or “Meta-narratives.” She analyzes 75 papers dealing with commodity funds of resource rich SWFs from 2000 to 2021. |
| 10 | See Maire et al. (2021) for their latest transparency rankings and governance issues and Ouni et al. (2020a). |
| 11 | |
| 12 | For a recent example see Areddy et al. (2025). |
| 13 | Blundell-Wignall et al. (2008). A more elaborate definition, by the International Working Group on Sovereign Wealth Funds (now the International Forum of Sovereign Wealth Funds) is SWFs are defined as special purpose investment funds or arrangements, owned by the general government. Created by the general government for macroeconomic purposes, SWFs hold, manage, or administer assets to achieve financial objectives, and employ a set of investment strategies which include investing in foreign financial assets. The SWFs are commonly established from balance of payments surpluses, official foreign currency operations, the proceeds of privatizations, fiscal surpluses, and/or receipts resulting from commodity exports International Working Group of Sovereign Wealth Funds (2008). See Rose (2023a) for an overview of the definitions of SWFs in the context of the Santiago Principles, discussed further below. |
| 14 | For the most part, funds which strictly finance national pension systems, Public Pension Reserve Funds (PPRFs) like Social Security Reserve Funds (SSRFs) funded by contributions in excess of current payouts, such as the US Social Security Trust Fund, or Sovereign Pension Reserve Funds (SPRFs) like the Australian Future Fund, funded by direct government transfers, and state or provincial level public pension funds, are not of concern in this paper even though they are often referred to as SWFs. Kimmitt (2008) offers a simpler categorization of sovereign investment: international reserves, public pension funds, state-owned enterprises, and SWFs which may be further disaggregated by source of funds, resource revenues, balance of payments surpluses, etc. |
| 15 | e.g., see Al-Hassan et al. (2013), Table 1 for a comparison of stabilization funds vis-à-vis savings funds. |
| 16 | |
| 17 | In Kazakhstan four banks, several construction/real estate ventures and a major agricultural enterprise were fully or partially nationalized and/or recapitalized (the operations resulted in a transfer of funds of about USD5 billion in 2008, USD1.8 billion in 2009 and the purchase of about USD4 billion in Samruk Kazyna bonds by the National Oil Fund). |
| 18 | See Divakaran et al. (2022) for a detailed overview of sovereign strategic investment funds. While they may be similarly problematic, they are not the main focus of this paper. |
| 19 | |
| 20 | Lenihan (2014) offers a summary of these discussions in her overview. Fotak et al. (2013) offers a comprehensive review of definitions of SWFs at that time. The activities of SWFs have evolved dramatically since then. Herein, we will not distinguish among all the variants and instead emphasize the heterogeneity of entities labeled SWFs. |
| 21 | While the Santiago Principles are often labeled “generally accepted accounting standards” for SWFs they are voluntary and rarely fully abided by. |
| 22 | Notes to Table 1 provide definitions and sources for all variables. With respect to country characteristics, here countries are labeled or scaled on measures of democracy and autocracy. Recently though, in the “new cultural economics” deeper measures of culture are proving important determinants of economic behavior. The persistence of poor institutions is of particular interest and worth exploring further. See Gershman (2017) for an overview of the recent literature. |
| 23 | But not the largest. BlackRock, Inc. reported 4th quarter, 2024 results noting they held USD11.6 trillion in assets under management. https://ir.blackrock.com/news-and-events/press-releases/press-releases-details/2025/BlackRock-Reports-Full-Year-2024-Diluted-EPS-of-42.01-or-43.61-as-Adjusted-Fourth-Quarter-2024-Diluted-EPS-of-10.63-or-11.93-as-Adjusted/default.aspx (accessed on 1 January 2026) |
| 24 | His efforts have gone through several iterations, the most detail is provided in Truman (2010), followed by several updates in Peterson Institute Policy Briefs, the latest in 2021. He also compares the components of his index to the Santiago Principles, discussed below, and looks at correlation with other measures. Bagnall and Truman (2013) presented updates to the Truman scores and for comparison calculated scores based on the Santiago Principles. Maire et al. (2021) provides the most recent scores with additional discussion of specific elements of the score. They note that transparency scores have been improving over time, but issues remain and many SWFs, some quite large, remain opaque. |
| 25 | Note the Center for Governance of Change, IE University also regularly reports on Sovereign Wealth Funds, but not transparency per se. See their annual reports, such as Aguilar et al. (2024) and individual papers such as Johnson (2025). Aguilera et al. (2016) also provides an analysis of SWF characteristrics and implications for governance. The Sovereign Investment Lab at Bocconi University also regularly publishes analyses of SWFs. |
| 26 | |
| 27 | These differ from the Top 50 SWFs listed in the Appendix A and tables in the text below, because many are much smaller in terms of AuM. Also note they use a score of 80 or higher as transparent. In the analysis below a score above the median is considered more transparent and below the median as less transparent. |
| 28 | |
| 29 | Differences in culture and political structure as a determinant of the origins and operations of SWFs is discussed further in Section 5 below. Wang and Li (2016) focuses on democracy and institutionalization of SWFs |
| 30 | The Santiago Principles may be found at http://www.imf.org/external/np/pp/eng/2008/022908.pdf (accessed on 12 January 2025). Rose (2023a) provides areview of the discussions and negotiations of the members of the International Working Group of SWFs in creating the Santiago Principles. |
| 31 | |
| 32 | There are Full and Associate members. Membership may be found at https://www.ifswf.org/our-members (accessed on 12 January 2025). |
| 33 | |
| 34 | They were British protectorates. Kuwait became independent in 1961, the others in 1971. |
| 35 | Braunstein (2017) provides a detailed review of the creation and activities of SWFs in each country and how the domestic political goals and strategies influence the specific activities of the SWF. |
| 36 | |
| 37 | https://www.bbc.com/news/business-54597256 (accessed on 12 January 2025). |
| 38 | |
| 39 | The survey of perceptions of SWFs by Hill & Knolton and Penn Schoen Berland (2010) attempts to address this issue. It is noted that “At a time of great volatility and uncertainty, sovereign wealth funds represent an extremely important source of capital for the global economy. Despite this importance, many nations appear to view these funds with caution, and no matter how large the pool of funds on offer, some SWFs could find their path to the most attractive investments blocked.” |
| 40 | For the reaction to criticisms and how SWFs may have changed see the case studies in Bazoobandi (2012). |
| 41 | These guidelines are overseen by a Council of Ethics established by Royal Decree in 2004 and subsequently revised. See Backer (2009, p. 1277), for early discussions. See Norges Bank Investment Management (2025), for current guidelines. The owner of the Fund is the Ministry of Finance on behalf of the Parliament and the Norwegian people. It is managed by Norges Bank Investment Management, a division of the National Bank. See https://www.nbim.no/en/about-us/about-the-fund/ (accessed on 12 January 2025). |
| 42 | Slawotsky (2009, p. 1241). Indeed this has happened frequently. See Dewenter et al. (2010) discussed below. Venkat et al. (2010). A move by SWF, Malaysia’s Khazanah Holdings offering USD 2.6 billion to buy a stake in Singapore hospital operator Parkway Holdings Ltd. that it does not already own, prompted India’s Fortis Healthcare Ltd. to abandon its own takeover efforts and relinquish control of the company. Zuckerman (2011) relates that Kuwait Investment Authority and Government of Singapore Investment Corporation paid several hundred million dollars for a 4.5% stake in TPG Holdings, a private-equity “powerhouse”). There are numerous additional examples. |
| 43 | Venkat et al. (2010). A move by SWF, Malaysia’s Khazanah Holdings offering USD 2.6 billion to buy a stake in Singapore hospital operator Parkway Holdings Ltd. that it does not already own, prompted India’s Fortis Healthcare Ltd. to abandon its own takeover efforts and relinquish control of the company. Zuckerman (2011) relates that Kuwait Investment Authority and Government of Singapore Investment Corporation paid several hundred million dollars for a 4.5% stake in TPG Holdings, a private-equity “powerhouse”). There are numerous additional examples including rcently by the US and Saudi Arabia Lipton et al. (2025). |
| 44 | They also provide evidence of SWF post investment influence (for a different sample of 172 transactions). Table 12, p. 274 presents investments made and then follow-on related activities and transactions initiated by the SWF or a firm that in which it had acquired a significant position. Table 13, p. 276 lists SWF activities which affected the normal business operations of the firm. |
| 45 | Dewenter et al. (2010) mentioned above, Kotter and Lel (2011), Sojli and Tham (2011) and Bortolotti et al. (2015). |
| 46 | See Park and Estrada (2009) Section C for a discussion of large investments made by SWFs in US financial institutions during the financial crisis. |
| 47 | Truman (2010, pp. 46–52) discusses market turmoil and uncertainty. Kotter and Lel (2011) find a positive announcement effect on the share price of recipient firms when a SWF invests in them, with the more transparent the SWF is, the greater the effect. Sun and Hesse (2009), however, find no effect on equity markets due to SWF investing. |
| 48 | |
| 49 | The Wassenaar Arrangement is a group of countries that promote transparency and greater responsibility in the transfer of weapons and dual se technologies. See https://www.wassenaar.org. Also, the National Defense Authorization Act (NDAA) of 2021 (National Defense, 2021) now requires the Defense Department to identify foreign “military companies,” civilian or state owned. |
| 50 | See Figures 4.4 and 4.5 for a snapshot of these networks. |
| 51 | Of course, one might artherein gue that it was simply a firm exercising monopoly power over the natural gas transmission lines that it controls and timing was just coincidental as Epstein and Rose (2009) seem to imply. |
| 52 | |
| 53 | |
| 54 | Slawotsky (2009) seems to suggest that the terms of the bailout of FNMA and GNMA favored China, which had very large positions in each. Avendano and Santiso (2009) find that SWFs invest essentially the same as a group of mutual funds, and primarily for financial purposes, but importantly in both cases, the sample of SWFs is critical for that conclusion to stand. See Cuervo-Cazurra et al. (2023) for a recent review of SWF non-business objectives and discreet power. And, see Lenihan (2014) and discussion below. |
| 55 | References in her paper provide numerous examples of SWF politically motivated actions. |
| 56 | Note at the time of this article economic power was of interest rather than military power. This of course was prior to the Russian invasion of Ukraine and the terror attacks in Israel leading to the on-going war there. |
| 57 | Given the appropriate transparency and disclosures OECD guidelines then argue that recipient countries should treat SWFs just as any other domestic firm, the “principle of regulatory proportionality.” |
| 58 | See also Thatcher and Vlandas (2016) for a discussion of policies in France and Germany. |
| 59 | |
| 60 | Singapore’s set up with the GISC managing government assets, but not owning them, and Temasek, owning assets and managing them are both private companies incorporated under Singapore’s Companies Act (Singapore’s Companies Act, 2006), Lee (2009). |
| 61 | See Fukase (2011). This article describes a USD 19.4 billion investment in seven major Japanese companies by an “obscure shareholder by the name of ‘SSBT OD05 Omnibus Account Treaty Clients’ now listed as one of the top ten holders of these companies shares. Sovereign wealth fund China Investment Corporation is one presence behind SSBT OD05 and The State Administration of Foreign Exchange, SAFE, which manages approximately USD 3 trillion in foreign reserves is also behind SSBT OD05 according to Japan Shareholders Services. |
| 62 | See Haberly (2011) network mapping analysis and Areddy et al. (2025) for recent example of Chinese port acquisitions. |
| 63 | |
| 64 | |
| 65 | Note from Beck and Fidora (2008) that at that time the UAE then owned 8% of Advanced Micro Devices. Now they own about 20% and have built an extensive network of inter-related chip related companies. See Haberly (2011) |
| 66 | See Hindelang and Pohl (2023), the annual report on the CELIS Forum. The CELIS Institute produces regular reports and articles on investment screening, in particular on national security issues, and hosts an annual conference on investment screening, inter alia. |
| 67 | The framework for FDI screening was last updated in 2024. See https://policy.trade.ec.europa.eu/enforcement-and-protection/investment-screening_en (accessed on 12 January 2025). |
| 68 | |
| 69 | Further, “they should be avoided when other existing measures are adequate and appropriate to address national security concerns. Most countries assign little or no role for investment policy in managing the national security risks. Among those countries that do use investment policy for protecting national security, risks to be addressed through investment reviews included: infiltration of the national economy by organized crime or terrorists; loss of control of key resources needed for national defense, impeding law enforcement, and loss of control of border or security sensitive geographic locations.” Other threats that several countries explicitly state as concerns warranting legal restraints include threats related to: money laundering; protection of state secrets; diversion of strategic capabilities for military purposes; investments which might hinder efforts of international organizations to maintain international peace and security. OECD (2008b). |
| 70 |
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Table 1.
(a) Most Transparent Sovereign Wealth Funds: This table provides fundamental information on the most transparent SWFs (TTS greater or equal to the Top 50 median of 65). Estimates of assets undermanagement by SWFI, Global SWF, and the SWF itself, when available. In addition, for transparency the Tuman SWF Scoreboard (TTI), the Linaburg–Maduell Transparency Index (LMTI) and the GSR are reported. Country characteristics, the Democracy Index, and the Autocracy Score are reported. Details are provided in the notes to this table. (b) Least Transparent Sovereign Wealth Funds: This table provides fundamental information on the least transparent SWFs (TTS less than Top 50 median of 65). Estimates of assets undermanagement by SWFI, Global SWF, and the SWF itself, when available. In addition, for transparency the Tuman SWF Scoreboard (TTI), the Linaburg–Maduell Transparency Index (LMTI), and the GSR are reported. Country characteristics, the Democracy Index, and the Autocracy Score are reported. Details are provided in the notes to the Table below. (c) Sovereign Wealth Funds Not Scored by Truman: This table provides fundamental information on SWFs for which there was insufficient information to calculate Truman SWF Scoreboard score. Estimates of assets under management by SWFI, Global SWF and the SWF itself, when available are reported. In addition, if information is available the Linaburg–Maduell Transparency Index (LMTI) and the GSR are reported. If information is available for country characteristics, the Democracy Index and the Autocracy Score are reported. Details are provided in the below.
Table 1.
(a) Most Transparent Sovereign Wealth Funds: This table provides fundamental information on the most transparent SWFs (TTS greater or equal to the Top 50 median of 65). Estimates of assets undermanagement by SWFI, Global SWF, and the SWF itself, when available. In addition, for transparency the Tuman SWF Scoreboard (TTI), the Linaburg–Maduell Transparency Index (LMTI) and the GSR are reported. Country characteristics, the Democracy Index, and the Autocracy Score are reported. Details are provided in the notes to this table. (b) Least Transparent Sovereign Wealth Funds: This table provides fundamental information on the least transparent SWFs (TTS less than Top 50 median of 65). Estimates of assets undermanagement by SWFI, Global SWF, and the SWF itself, when available. In addition, for transparency the Tuman SWF Scoreboard (TTI), the Linaburg–Maduell Transparency Index (LMTI), and the GSR are reported. Country characteristics, the Democracy Index, and the Autocracy Score are reported. Details are provided in the notes to the Table below. (c) Sovereign Wealth Funds Not Scored by Truman: This table provides fundamental information on SWFs for which there was insufficient information to calculate Truman SWF Scoreboard score. Estimates of assets under management by SWFI, Global SWF and the SWF itself, when available are reported. In addition, if information is available the Linaburg–Maduell Transparency Index (LMTI) and the GSR are reported. If information is available for country characteristics, the Democracy Index and the Autocracy Score are reported. Details are provided in the below.
| (a) | ||||||||||
| Rank (Assets Under Management) | Sovereign Wealth Fund | Country | Estimated or Reported Assets (USD Billion) | Transparency Indices | Country Characteristics | |||||
| SWFI (2025) 1 | Global SWF (2025) 2 | SWF Itself Circa (2023–2024) 3 | Truman SWF Scoreboard, 0–100 (2019) 4 | Linaburg–Maduell Transparency Index, 0–10 (2024) 5 | GSR, 0–25 (2024) 6 | Democracy Index 0–10 (2024) 7 | Autocracy Score, 0–10 (2018) 8 | |||
| 1 | Norway Government Pension Fund Global | Norway | 1739 | 1743 | 1739 | 100 | 10 | 24 | 9.81 | 0 |
| 2 | China Investment Corporation | China | 1332 | 1332 | 1330 | 74 | 7 | 20 | 2.11 | 7 |
| 4 | Abu Dhabi Investment Authority | UAE | 1058 | 1110 | NA | 65 | 6 | 14 | 3.07 | 8 |
| 5 | Kuwait Investment Authority | Kuwait | 1029 | 969 | NA | 70 | 6 | 10 | 2.78 | 7 |
| 10 | Hong Kong Monetary Authority Investment Portfolio | Hong Kong (China) | 514 | 526 | NA | 70 | 8 | 22 | 5.09 | NA |
| 13 | Mubadala Investment Company | UAE | 302 | 330 | 302 | 75 | 10 | 23 | 3.07 | 8 |
| 14 | Temasek Holdings | Singapore | 288 | 288 | 291 | 79 | 10 | 25 | 6.18 | 4 |
| 15 | Turkey Wealth Fund | Turkey | 279 | 190 | 320 | 68 | 6 | 19 | 4.26 | 4 |
| 16 | Abu Dhabi Developmental Holding Company | UAE | 225 | 225 | NA | 65 | 5 | 18 | 3.07 | 8 |
| 17 | Korea Investment Corporation | South Korea | 189 | 207 | 189 | 85 | 8 | 23 | 7.75 | 0 |
| 19 | Future Fund | Australia | 150 | 204 | 180 | 87 | 10 | 22 | 8.85 | 0 |
| 25 | State Oil Fund of Azerbaijan | Azerbaijan | 60 | 60 | 49.03 | 92 | 10 | 7 | 2.8 | 7 |
| 28 | New Zealand Superannuation Fund | New Zealand | 48 | 46 | 43.14 | 94 | 10 | 25 | 9.61 | 0 |
| 39 | Azerbaijan Investment Holding | Azerbaijan | 22 | 37 | NA | 92 | NA | 7 | 2.8 | 7 |
| 43 | Timor-Leste Petroleum Fund | Timor-Leste | 17 | 19 | 18.91 | 91 | 9 | 12 | 7.03 | 1 |
| 45 | Ireland Strategic Investment Fund | Ireland | 16 | 19 | 15.09 | 85 | 8 | 25 | 9.19 | 0 |
| Median Value (n = 16) | 252 | 216 | 189 | 82 | 8 | 21 | 5 | 4 | ||
| (b) | ||||||||||
| Rank (Assets Under Management) | Sovereign Wealth Fund | Country | Estimated or Reported Assets (USD Billion) | Transparency Indices | Country Characteristics | |||||
| SWFI (2025) 1 | Global SWF (2025) 2 | SWF Itself Circa (2023–2024) 3 | Truman SWF Scoreboard, 0–100 (2019) 4 | Linaburg–Maduell Transparency Index, 0–10 (2024) 5 | GSR, 0–25 (2024) 6 | Democracy Index 0–10 (2024) 7 | Autocracy Score 0–10 (2018) 8 | |||
| 6 | Public Investment Fund | Saudi Arabia | 925 | 925 | 765 | 39 | 6 | 24 | 2.08 | 10 |
| 7 | GIC Private Limited | Singapore | 801 | 847 | NA | 64 | 7 | 16 | 6.18 | 4 |
| 9 | Qatar Investment Authority | Qatar | 526 | 524 | NA | 46 | 5 | 18 | 3.17 | 10 |
| 12 | Investment Corporation of Dubai | UAE | 341 | 380 | NA | 64 | 5 | 14 | 3.07 | 8 |
| 18 | National Development Fund of Iran | Iran | 157 | 162 | 132 | 56 | 4 | 13 | 1.96 | 7 |
| 20 | National Welfare Fund | Russia | 133 | NA | NA | 51 | NA | NA | 2.03 | 5 |
| 21 | Emirates Investment Authority | UAE | 91 | 102 | NA | 36 | 3 | 7 | 3.07 | 8 |
| 22 | Samruk-Kazyna | Kazakhstan | 81 | 79 | 81.17 | 64 | 10 | 18 | 3.08 | 6 |
| 24 | Brunei Investment Agency | Brunei | 73 | 65 | NA | 30 | 1 | 2 | NA | NA |
| 30 | Libyan Investment Authority | Libya | 40 | 68 | 68.4 | 23 | 4 | 13 | 2.31 | NA |
| 36 | Russian Direct Investment Fund | Russia | 25 | 28 | NA | 37 | 7 | 4 | 2.03 | 5 |
| 41 | Mumtalakat Holding | Bahrain | 18 | 18 | 16.8 | 55 | 10 | 12 | 2.47 | 10 |
| 44 | Revenue Regulation Fund | Algeria | 16 | NA | NA | 26 | 1 | NA | 3.55 | 1 |
| Median Value (n = 13) | 91 | 102 | 81.17 | 46 | 5 | 13 | 2.77 | 7 | ||
| (c) | ||||||||||
| Rank (Assets Under Management) | Sovereign Wealth Fund | Country | Estimated or Reported Assets (USD Billion) | Transparency Indices | Country Characteristics | |||||
| SWFI (2025) 1 | Global SWF (2025) 2 | SWF Itself Circa (2023–2024) 3 | Truman SWF Scoreboard, 0–100 (2019) 4 | Linaburg–Maduell Transparency Index, 0–10 (2024) 5 | GSR, 0–25 (2024) 6 | Democracy Index 0–10 (2024) 7 | Autocracy Score 0–10 (2018) 8 | |||
| 3 | SAFE Investment Company | China | 1090 | 1358 | NA | NA | 2 | 4 | 2.11 | 7 |
| 8 | Badan Pengelola Investasi Daya Anagata Nusantara | Indonesia | 600 | NA | NA | NA | NA | NA | 6.44 | 0 |
| 11 | National Council for Social Security Fund | China | 414 | 424 | NA | NA | 5 | 8 | 2.11 | 7 |
| 23 | Dubai Investment Fund | UAE | 80 | 80 | NA | NA | NA | 18 | 3.07 | 8 |
| 26 | Kazakhstan National Fund | Kazakhstan | 56 | 65 | 55.7 | NA | 2 | 4 | 3.08 | 6 |
| 27 | Oman Investment Authority | Oman | 50 | 50 | 50 | NA | 4 | 14 | 3.05 | 8 |
| 29 | Ethiopian Investment Holdings | Ethiopia | 45 | 46 | NA | NA | 5 | 8 | 3.24 | 2 |
| 31 | Khazanah Nasional | Malaysia | 36 | 32 | 30.68 | NA | 6 | 18 | 7.11 | 7 |
| 32 | National Wealth Fund, UK | UK | 36 | 36 | 34.75 | NA | NA | NA | 8.34 | 0 |
| 33 | CNIC Corporation Limited | Hong Kong (China) | 33 | NA | NA | NA | NA | NA | 5.09 | NA |
| 34 | Hong Kong Future Fund | Hong Kong (China) | 28 | NA | NA | NA | NA | NA | 5.09 | NA |
| 35 | Beijing State-Owned Assets Management Co., Ltd. | China | 28 | NA | NA | NA | NA | NA | 2.11 | 7 |
| 37 | Nuclear Waste Disposal Fund | Germany | 23 | 26 | 24.91 | NA | NA | 24 | 8.73 | 0 |
| 38 | Fund for Reconstruction and Development of Uzbekistan | Uzbekistan | 23 | NA | 23.61 | NA | NA | 4 | 2.1 | 9 |
| 40 | Polish Development Fund | Poland | 20 | 20 | NA | NA | NA | 16 | 7.4 | 10 |
| 42 | Malta Government Investments | Malta | 17 | 2 | NA | NA | NA | 3 | 7.93 | NA |
| 46 | Sociedad Estatal de Participaciones Industriales | Spain | 15 | NA | 17.23 | NA | NA | NA | 8.13 | 0 |
| 47 | The Sovereign Fund of Egypt | Egypt | 12 | 2 | NA | NA | 4 | 11 | 2.79 | 4 |
| 48 | Sharjah Asset Management Holding LLC | UAE | 10 | 3 | NA | NA | NA | 6 | 3.07 | 8 |
| 49 | Future Ireland Fund | Ireland | 9 | NA | NA | NA | NA | NA | 9.19 | 0 |
| 50 | Maharlika Investment Fund | Philippines | 9 | NA | NA | NA | NA | NA | 6.63 | 0 |
| Median Value (n = 21) | 28 | 36 | 33 | 4 | 8 | 5 | 7 | |||
Note: Only national level funds are included, NA means not available. 1,2,3 Total asset values for SWFs are obtained from the Sovereign Wealth Fund Institute, Global Sovereign Wealth Fund (GSWF), as well as from SWFs’ annual reports and official websites. Data reported are the latest available and the year is noted. SWF rank is based on assets under management as reported by the Sovereign Wealth Fund Institute (SWFI). 4 The Truman SWF Scoreboard is provided by the Peterson Institute for International Economics. It ranges from 0 to 100. The Truman SWF Scoreboard is from 2019, the last date available. 5 The Linaburg–Maduell Transparency Index is from SWFI. It ranges from 0 to 10 and the last date available is 2024. 6 The Governance, Sustainability, and Resilience (GSR) Index is from the Global Sovereign Wealth Fund (GSWF). It ranges from 0 to 15 and the last date available is 2024. 7 The Democracy Index is from the Economist Intelligence Unit. It ranges from 0 to 10 (most democratic) and 2024 is reported here. 8 The Autocracy Score is from the Center for Systemic Peace and ranges from 0 to 10 (most autocratic). Data and scores used from SWFI and GSWF were retrieved from their websites on 22 March 2025.
Table 2.
Selected average Truman SWF 2019 scores.
| Region or Group | Average Score | Range |
|---|---|---|
| Africa | 52 | 83–11 |
| Asia | 66 | 92–30 |
| Middle East, Gulf Cooperation Council (GCC) | 54 | 75–24 |
| Middle East, Non-GCC | 55 | 85–23 |
| OECD | 80 | 100–48 |
| Latin America, non-OECD | 70 | 82–48 |
| Other | 57 | 57 |
| Russia | 44 | 51–31 |
Note: Average scores are only for countries reported in Maire et al. (2021) and some countries have multiple funds. OECD: Australia, Canada, Chile, France, Ireland, Italy, Korea, Mexico, New Zealand, Norway, Spain, Turkey, and the United States; Asia: Azerbaijan, Brunei, China, India, Hong Kong, Kazakhstan, Kiribati, Malaysia, Nauru, Timor-Leste, and Singapore; Non-OECD Latin America: Panama, Peru, and Trinidad and Tobago; Africa: Algeria, Angola, Botswana, Ghana, Equatorial Guinea, Morocco, Nigeria, Rwanda, and Senegal; GCC: Bahrain, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates; Non-GCC Middle Eastern: Iran, Libya, and Palestine; Other: Cyprus; Russia.
Table 3.
(a) Correlation of Transparency Measures and Country Characteristics, Top 50 Sovereign Wealth Funds (Corresponding to Table A1 of the Appendix A). (b) Correlation of Transparency Measures and Country Characteristics, Most Transparent Sovereign Wealth Funds (Corresponding to Table 1a). (c) Correlation Analysis of Transparency Measures and Country Characteristics, Least Transparent Sovereign Wealth Funds (Corresponding to Table 1b).
Table 3.
(a) Correlation of Transparency Measures and Country Characteristics, Top 50 Sovereign Wealth Funds (Corresponding to Table A1 of the Appendix A). (b) Correlation of Transparency Measures and Country Characteristics, Most Transparent Sovereign Wealth Funds (Corresponding to Table 1a). (c) Correlation Analysis of Transparency Measures and Country Characteristics, Least Transparent Sovereign Wealth Funds (Corresponding to Table 1b).
| (a) | |||||
| Truman SWF Scoreboard | Linaburg–Maduell Transparency Index | GSR | Democracy Index | Autocracy Score | |
| Truman SWF Scoreboard | 1 | ||||
| Linaburg–Maduell Transparency Index | 0.67 | 1 | |||
| GSR | 0.45 | 0.37 | 1 | ||
| Democracy Index | 0.73 | 0.5 | 0.57 | 1 | |
| Autocracy Score | −0.72 | −0.48 | −0.41 | −0.91 | 1 |
| (b) | |||||
| Truman SWF Scoreboard | Linaburg–Maduell Transparency Index | GSR | Democracy Index | Autocracy Score | |
| Truman SWF Scoreboard | 1 | ||||
| Linaburg–Maduell Transparency Index | 0.81 | 1 | |||
| GSR | 0.78 1 | 0.31 | 1 | ||
| Democracy Index | 0.74 | 0.53 | 0.6 | 1 | |
| Autocracy Score | −0.73 | −0.48 | −0.51 | −0.96 | 1 |
| (c) | |||||
| Truman SWF Scoreboard | Linaburg–Maduell Transparency Index | GSR | Democracy Index | Autocracy Score | |
| Truman SWF Scoreboard | 1 | ||||
| Linaburg–Maduell Transparency Index | 0.4 | 1 | |||
| GSR | 0.3 | 0.16 | 1 | ||
| Democracy Index | 0.48 | 0.08 | 0.15 | 1 | |
| Autocracy Score | −0.31 | −0.13 | 0.36 | −0.5 | 1 |
Note: 1 Excluding the scores for the Kuwait Investment Authority, the State Oil Fund of Azerbaijan, and the Timor-Leste Petroleum Fund for which the discrepancy between the IIS and GSRs is quite large. Including them, the correlation is 0.2.
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Kemme, D.M. The Sovereign Wealth Fund Paradox: Evolution, Challenges, and Unresolved Issues. J. Risk Financial Manag. 2026, 19, 119. https://doi.org/10.3390/jrfm19020119
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Kemme DM. The Sovereign Wealth Fund Paradox: Evolution, Challenges, and Unresolved Issues. Journal of Risk and Financial Management. 2026; 19(2):119. https://doi.org/10.3390/jrfm19020119
Chicago/Turabian StyleKemme, David M. 2026. "The Sovereign Wealth Fund Paradox: Evolution, Challenges, and Unresolved Issues" Journal of Risk and Financial Management 19, no. 2: 119. https://doi.org/10.3390/jrfm19020119
APA StyleKemme, D. M. (2026). The Sovereign Wealth Fund Paradox: Evolution, Challenges, and Unresolved Issues. Journal of Risk and Financial Management, 19(2), 119. https://doi.org/10.3390/jrfm19020119
