A new breed of sovereign wealth fund – without the wealth

Once the preserve of rich oil exporters or nations with trade surpluses, like Norway, Kuwait and Singapore, an unlikely new breed of sovereign wealth fund is emerging – in countries with large deficits and deep debt.

Sovereign wealth funds (SWFs), which first emerged in the 1950s, are traditionally associated with huge financial firepower. They control about $6.5 trillion, according to data provider Preqin, and have transformed the global investment landscape by snapping up stakes in multinational companies and landmark real estate in cities from London to Melbourne.

Now Turkey, Romania, India and Bangladesh are launching sovereign funds – but for very different reasons than usual, and with very different methods.

Traditionally, wealthy nations use SWFs to invest their surplus billions overseas to prevent inflation at home, diversify income streams and accumulate savings for the day when commodity revenues run out. Read more…