Sovereign Wealth Enterprise

A Sovereign Wealth Enterprise is a sovereign investment vehicle that is owned and controlled by a sovereign wealth fund.

Frequently Asked Questions

Why do Sovereign Wealth Funds (SWF) create Sovereign Wealth Enterprises (SWE)?

There are a variety of different reasons on why an institutional investor may form a sovereign wealth enterprise. One is for flexibility. A sovereign wealth fund could have a strict investment mandate in place; however, the sovereign wealth enterprise may operate with its own set of parameters and rules. For instance, many public pension funds in the United States are unable to short stocks. To get around this, the institutional investor can hire an external manager to manage a portfolio that could have a long-short strategy.

Another key reason could be operational transparency. If a sovereign wealth fund has hundreds of sovereign wealth enterprises, it is harder to track their holdings, activities and tactics. Other reasons could be tax-related. Last, is to avoid being categorized as a sovereign wealth fund and avoid the public spotlight.

How large are Sovereign Wealth Enterprises (SWE)?

We are not certain of the aggregate asset size of sovereign wealth enterprises. SWEs cannot be larger than the total size of sovereign wealth funds since they are merely a component of some sovereign wealth funds.

Is a State-Owned Enterprise (SOE) the same as a Sovereign Wealth Enterprise (SWE)?

A state-owned enterprise can be considered a sovereign wealth enterprise if it is directly under the control of a sovereign wealth fund.