What defines a sovereign wealth fund (SWF)?

A sovereign wealth fund (SWF) is defined as a state-owned investment fund that is composed of financial assets. These funds are established by national governments to manage revenue from various sources, such as surplus reserves, natural resources, or foreign investments. The primary purpose of an SWF is to invest the assets for long-term financial returns while reducing volatility and supporting economic objectives of the country.

SWFs are typically tasked with ensuring the wealth generated from a country's resources is sustainable over the long term, benefiting future generations. They operate differently than private investment groups, corporations, or non-profits, as their focus is often on stabilizing the economy, funding public projects, or diversifying national revenues. Understanding this role helps clarify the distinct nature of sovereign wealth funds compared to other investment entities.