SOVEREIGN WEALTH FUND

Sovereign Wealth Fund

Note: Dear Customer, the actual word count for your assignment is 3800 but due to footnotes the word count has exceeded the limit (Kindly exclude the footnotes while counting the words)Sovereign wealth Fund

Sovereign wealth Fund, corresponding to the private wealth, is a specific tax and budget allocation, the balance of payments surpluses and the accumulation of natural resource revenues, etc. formed by the government-controlled and dominated, usually in foreign currency held in the form of public wealth. Sovereign wealth of traditional conservative management of very passive on the impact of national and international financial markets is very limited. Have benefited in recent years the main oil prices and international trade, international expansion and rapid growth, its management became an increasingly important issue. Sovereign wealth funds have emerged in this context. Unlike traditional government pension funds and the reserve assets held by those who simply to maintain the local currency stable government agencies, sovereign wealth funds is a new specialization, market-oriented incentives investment institutions.

In recent years, rapid growth in the number of sovereign wealth funds is to set up sovereign wealth funds of countries, including some developed countries and resource-rich countries, including some emerging market countries and resource-poor countries. Asset size of sovereign wealth funds, the rapid expansion of the end of 2006, global assets managed by sovereign wealth funds have accumulated to about 1500 to 2500 billion U.S. dollars. Meanwhile, the distribution of its assets are no longer focused on the G8 fixed income type tools, but rather focus on include equity and other risky assets, including global diversified asset portfolio , and even extended to the foreign real estate , private equity , commodity futures , hedge funds and other non-traditional type of investment categories. Sovereign wealth funds have become an increasingly active in international financial markets and important participants in the market influence is growing. And official foreign exchange reserves, sovereign wealth funds are all state-owned, belong to broader national sovereign wealth, the source is also quite similar. But still have their differences:

Official foreign exchange reserves reflected in the central bank balance sheet assets and liabilities, while the latter than in the central bank balance sheet assets and liabilities, a separate balance sheet and other financial statements accordingly.

The operation of the official foreign currency reserve assets and its change with a country balance of payments and exchange rate policies are closely related, and sovereign wealth funds generally associated with a country's international balance of payments and exchange rate policy are not necessarily directly linked.

The official foreign currency reserve assets of changes in the monetary policy effect, that other conditions remain unchanged, the central bank's foreign currency reserve assets will increase or decrease a country's monetary base caused by the change of money supply increase or decrease. The change of sovereign wealth funds generally does not have the currency effect.

Central banks in foreign exchange reserves management is usually conservative and cautious approach to the pursuit of maximum liquidity and maximum ...