May 18, 2013
According to the Sovereign Wealth Institute which is regarded as an authority in the field, the value of the Sovereign Wealth Fund (SWF) for the United Arab Emirates, which includes Abu Dhabi and Dubai, approximated $815 billion by March 2013. That is 81.5% of $1 trillion!
What the heck is a SWF? Simply stated, it is money that accumulates from a country’s budget and trade surpluses that is set aside for investment purposes that will benefit a country’s economy. Most SWFs are invested in foreign assets.
As an example, the UAE is wisely diversifying its revenue stream by earmarking a portion of the income from oil exports into a SWF that invests in foreign assets that earn an attractive short- or long-term return and act as insurance against oil-related risk. I categorize that risk as minimal, however, considering it has 10% of the world’s proven oil reserves.
Look at the UAE’s reported $815,000,000,000 SWF this way: it is 15% of the world’s total. And, to think that the country is only the size of the State of Maine in the US.