Other sovereign wealth funds are simply the state savings that are invested by various entities for the purposes of investment return, and that may not have a significant role in fiscal management. There have been attempts to distinguish funds held by sovereign entities from foreign-exchange reserves tingkat Forex by central banks.
Sovereign wealth funds can be characterized as maximizing long-term return, with foreign exchange reserves serving short-term “currency stabilization”, and liquidity management. Many central banks in recent years possess reserves massively in excess of needs for liquidity or foreign exchange management. The term “sovereign wealth fund” was first used in 2005 by Andrew Rozanov in an article entitled, “Who holds the wealth of nations? Some of them have grabbed attention making bad investments in several Wall Street financial firms such as Citigroup, Morgan Stanley, and Merrill Lynch. SWFs invest in a variety of asset classes such as stocks, bonds, real estate, private equity and hedge funds. Many sovereign funds are directly investing in institutional real estate.
26 billion in direct sovereign wealth fund transactions were recorded in institutional real estate for the last half of 2012. Sovereign wealth funds have existed for more than a century, but since 2000, the number of sovereign wealth funds has increased dramatically. The first SWFs were non-federal U. 19th century to fund specific public services. Another early registered SWFs is the Revenue Equalization Reserve Fund of Kiribati.
SWFs are typically created when governments have budgetary surpluses and have little or no international debt. It is not always possible or desirable to hold this excess liquidity as money or to channel it into immediate consumption. This is especially the case when a nation depends on raw material exports like oil, copper or diamonds. There are two types of funds: saving funds and stabilization funds. Stabilization SWFs are created to reduce the volatility of government revenues, to counter the boom-bust cycles’ adverse effect on government spending and the national economy.