Moody’s States SWFs Support Sovereign Creditworthiness

doha sovereign wealth fund

Having a substantial sovereign wealth fund is a good thing for many fossil fuel dependent developing economies. These intergenerational savings vehicles can provide a cushion for government finances in times of oil price volatility. Moody’s recently issued a report, “Sovereign Wealth Funds: Sizeable Assets Provide Important Fiscal Buffers Against Lower Oil Revenues” which highlights sovereign wealth funds, investment strategies, rapid fund growth post-2000, transparency and recent trends among other items.

To learn more about the report: Go to Moody’s

“Seventy-three percent of sovereign wealth fund assets globally are funded from oil and gas export revenues,” said Elena Duggar, senior vice president, credit policy at Moody’s and co-author of the report, in a press release. “As oil prices remain lower for longer, fiscal and current account balances of oil exporters will be under increasing pressure. … As a result, we expect increasing use of sovereign wealth fund assets to finance budget deficits and support domestic economies.”

Duggar and her team at Moody’s explored the current landscape of sovereign funds in which they point out total wealth fund assets are very concentrated among a few nations.

When talking about asset allocation changes due to a low-yield environment, the report states, “From an economic and financial perspective, these recent trends mean a greater diversification of SWF portfolios, both geographically and across a wider array of asset classes.”

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