INTRODUCTION A sovereign wealth fund (SWF) is a state-owned investment fund investing in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds. SWFs are invested globally. Central banks use their foreign-exchange reserves or revenues from commodity exports to fund these investments. The three main characteristics of SWFs are
1. To maximize long-term returns using foreign exchange reserves
2. To serve the short-term "currency stabilization"
3. Liquidity management
SIGNIFICANCE AND IMPORTANCE OF SOVEREIGN FUNDS
OBJECTIVES OF SWFS SWFs are created from budgetary surpluses where the governments have no international debt. In countries where such liquidity is not possible, such as the nations that depend on raw material exports, the main objective for creation of SWF is for controlling high volatility of resource prices, unpredictability of extraction, and exhaustibility of resources.
STABILIZATION SWFS The SWFs that are created to reduce volatility of government revenues, to counter the boom-bust cycles' adverse effect on government spending and the national economy are called Stabilization SWFs.

SAVINGS SWFS These SWFs are created to build up savings for future generations.
Resource curse SWFs can help avoid resource curse in resource-rich countries. Governments may be able to spend the money immediately, but risk causing the economy to overheat, e.g., in Hugo Chávez's Venezuela or Shah-era Iran. In circumstances such as economy overheat in Hugo Chávez's Venezuela or Shah-era Iran which aroused due to high liquidity, saving the money to spend during a period of low inflation is often desirable. SWFs are also created for economical and strategic reasons such as war chests.
• The Kuwait Investment Authority managed excess reserves above the level needed for currency reserves during the Gulf War.
• Government of Singapore Investment Corporation and Temasek Holdings are created due to the desire to bolster Singapore's standing as an international financial centre. Korea Investment Corporation is also a similar fund.
GROWTH OF SWFS The SWF growth attracting close attention for the below reasons:
• As this asset pool continues to expand in size and importance, so does its potential impact on various asset markets.
• Some countries worry that foreign investment by SWFs raises national security concerns because the purpose of the investment might be to secure control of strategically important industries for political rather than financial gain. These concerns have led the European Union (EU) to reconsider whether to allow its members to use "golden shares" to block certain foreign acquisitions.[4] This strategy has largely been excluded as a viable option by the EU, for fear it would give rise to a resurgence in international protectionism. In the United States, these concerns are addressed by the Exon–Florio Amendment to the Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418, § 5021, 102 Stat. 1107, 1426 (codified as amended at 50 U.S.C. app. § 2170 (2000)), as administered by the Committee on Foreign Investment in the United States (CFIUS).
• Their inadequate transparency is a concern for investors and regulators: for example, size and source of funds, investment goals, internal checks and balances, disclosure of relationships, and holdings in private equity funds. Many of these concerns have been addressed by the IMF and its Santiago Principles, which set out common standards regarding transparency, independence, and governance.
• SWFs are not nearly as homogeneous as central banks or public pension funds.
COUNTRIES OF ORIGINS
LARGEST FIVE SWFS The largest five SWFs based on the size of assets they manage are:

BRICS SWFS
SANTIAGO PRINCIPLES The international working group of sovereign wealth funds published the generally accepted principles and practices in October 2008. These are called “Santiago principles”. During the conference the BRIC countries, Brazil, Russia, China and India, voluntarily participated in the discussion showing their interest in SWF investments.
BRAZIL
Brazil has a non-commodity fund that supports the export activities of the companies. It was established in 2009 only. It was created as a mechanism for anti-cyclical developments and for promoting investments in projects of strategic interest to Brazil abroad as well as within the country. The Fund uses financial instruments such as high investment grade corporate bonds rather than diffusing the capital of firms.
RUSSIA
The retirement fund of the Russian Federation is an out of state budget fund created in 1990. The financial stocks are generated from compulsory insurance installments from the employers and the citizens. The two other state off-budget funds are the Fund of social security and the Fund of compulsory medical insurance.
INDIA
The largest centralized storage sovereign pension fund of India is the Employees' Provident Fund. The Fund primarily invests its assets in domestic government bonds, debt obligations of state-owned enterprises and projects with a social purpose. In November 2008, the state decided that from January 2009 mandatory contributions to the Employees' Provident Fund will be reduced from 11% to 8% of salary, and this rule will apply for 2 years. The declining levels of assessments should help to increase the purchasing power of the population covered by this pension fund. During the economic crisis, this measure may enhance consumption, thus stimulating economic activity in the country.
CHINA
China holds four SWFs. The Investment Company of State foreign exchange management (SAFE) is created in 1997 to manage foreign reserves. It is the fifth largest SWF in the world. It started with investments in safe financial instruments. The China Investment Corporation (CIC) was created in 2007 to buy shares and high-risk bonds and to make direct investments, particularly in companies of the oil industry of West European countries (Total, BP, Royal Dutch, Shell Plc). Falling stock markets in 2008 led SAFE to losses. It is the fourth largest SWF in the world. It is aimed to improve the governance of key state-owned financial institutions, and to help Chinese enterprises expand abroad. The National Social Security Fund (NSSF) pension fund is a strategic reserve fund created by the Central Committee of the Communist Party and State Council in 2000 as a solution to the problem of the aging population.

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