Sovereign Wealth Funds’ (SWFs) Assets under Management (AuM) have significantly increased over the last decade, rising from $6.7 trillion globally in 2014 to $12.7 trillion in 2023, with these funds becoming an important international investor class.
A new report from TheCityUK, ‘Sovereign Wealth Funds: Global trends and the UK's role in the evolving landscape for Sovereign Investment Vehicles’, reveals that SWFs’ AuM grew at an average annual rate of 7% over the decade to 2023. While SWFs have been around for over 100 years, the substantial size and high liquidity of their assets have helped to raise their profile considerably in recent decades.
It also shows that SWFs are significant drivers of the transition to renewable energy and broader sustainability. In 2023, Sovereign Investment Vehicles (SIVs) – SWFs among them – invested $21.6bn in ‘green’ assets (e.g. renewable energy or electric vehicles) – more than double that invested in ‘black’ assets (e.g. carbon-based fossil fuels and mining). Between 2018 and 2023 the value of green investments grew at an annual average rate of 49%, while the value of black investments grew at just 4% a year, according to TheCityUK calculations*.
Anjalika Bardalai, Chief Economist & Head of Research, TheCityUK, said, “Sovereign Wealth Funds have become an increasingly important investor class globally, due to their very sizeable assets under management and evolving priorities driving cross border capital flows.
“Due to their long-term investment strategies and mandates that are often aligned to public policy objectives, Sovereign Wealth Funds have a particularly important part to play in green and sustainable finance. Recent investment examples highlight their outsize contribution to the transition to renewable energy, and to sustainable growth more broadly.”
The UK’s new National Wealth Fund (NWF), for instance—although a Strategic Investment Fund rather than a Sovereign Wealth Fund—will have total capitalisation of £27.8bn. It will aim to leverage private sector investment into sectors such as green hydrogen, carbon capture and green steel.
The report also highlights the prominence of Sovereign Wealth Funds outside advanced economies, with seven of the ten largest SWFs from emerging markets and middle-income economies. In 2023, China had the largest share of SWFs’ AuM, with around a fifth of the global total (21%), followed by the UAE (16.9%) and Norway (12.6%).
The UK is an important centre for the management of SWF assets, with London continuing to be a preferred international base of operations for many of the largest SWFs.
The UK also remains a world leader in attracting foreign direct investment (FDI), attracting an annual average of $46bn in FDI in the decade to 2023—including investment by SWFs. According to TheCityUK calculations**, the UK ranked seventh globally as a destination for inward FDI and second in Europe.
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