What is a sovereign wealth fund?

Most are funded by revenues from commodity exports or from foreign exchange reserves held by the central bank. Their aims vary, from saving for the future to steadying the state’s finances. The Santiago Principles, 24 voluntary principles and practices welcomed by the IMF’s policy committee in 2008, set out good practice for them.

Say a country earns $10 billion a year from oil exports and saves $2 billion of it in a sovereign wealth fund, which puts 10% of that, or $200 million, into private funds. Simple example. Terms vary by fund.

They invest globally, and many put money into private funds, which makes them a source of capital that managers court.

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