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After the Bell: Are sovereign wealth funds the Bond villains of global finance?

After the Bell: Are sovereign wealth funds the Bond villains of global finance?
Tim Cohen
By Tim Cohen
26 Feb 2025
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What intrigues me about the funds is the way they affect stock markets around the world. My guess is that they are so large, they tend to focus on very large companies to remain liquid. If they do invest in smaller companies, I guess it’s possible they could easily end up owning large stakes that might increase the risk of antitrust issues. Is that helping to generate the outperformance, at least on stock markets, of very large companies?

So, a sovereign wealth fund walks into a bar and the bartender says,  “What’ll it be?” The fund says: “Something safe, liquid and with long-term returns.” The bartender gives him a glass of tap water. 

Sovereign wealth funds are like the new Bond villains — everywhere, ultrarich, and secretly trying to buy the world. I recently came across a list of the top 10 funds. I was always vaguely aware of the enormous Norwegian wealth funds, but it still amazed me just how many there are now — and how big they are. Take a look at this list: 



Those are a lot of digits. The largest is, in fact, the Norwegian government pension fund, which was established in 1990, but the first capital transfer into the fund only occurred in 1996. The fund was created to manage surplus revenues from Norway’s vast oil and gas resources in the North Sea; it was designed to prevent the so-called Dutch disease, after that resource boom strengthened the country’s currency, making other industries less competitive globally.

Its performance has been good but not spectacular. Over the past 20 years, the fund has achieved an annual average return of about 6.8%. It is conservatively managed, with about 70% invested in equities, and much of the rest in bonds and property. Its investments are totally inevitable: last year, Apple, Microsoft and Nvidia were the fund’s top holdings. But it’s so huge that its value is now increasing in leaps and bounds. The fund achieved a return of 16.1% in 2023, the largest annual return in its history. 

In 2024, the fund earned a record $222-billion in profit fuelled by strong gains across the tech sector. The fund is now worth about $320,000 per Norwegian citizen. At this growth rate, the fund will make millionaires out of each in about 20 years. It’s been a blow-away success. 

And possibly for that reason, the idea has become increasingly popular. There are now five with more than a trillion dollars in investments and three more getting up there pretty quickly.  

Key role


China’s two biggest funds, holding $2.4-trillion in assets, are playing a key role in financing the Belt and Road Initiative and other strategic industries. Through these funds, billions have been invested in railroads, green energy and mining projects across Africa. Notably, Chinese investment across the region is 2.5 times greater than Western nations put together, reports Visual Capitalist, which drew up the list. 

The Saudi Arabian Public Investment Fund, with $925-billion in assets, is also interesting. It’s made huge investments in Uber, Nintendo and (would you believe?) Heathrow Airport. In 2025, the fund plans to invest $1-billion in the sports-streaming service DAZN, says Visual Capitalist.

Lots of other countries want to get in on the action. In early February, US President Donald Trump signed an executive order to establish an American sovereign wealth fund, although the source of these funds remains unclear. Trump has suggested the fund can be used to buy TikTok to allow it to continue operating in the US, but this is down the road. It’s been suggested at various times by various parties that South Africa should create one.

The problem is obvious: these funds are financed by budget surpluses. The US faces a $1.8-trillion deficit, and we’re in the fifth consecutive year that the US deficit has run over $1-trillion. Similarly, South Africa is running an $18.3-billion annual deficit. Sovereign wealth funds are designed for countries with too much money, not too little.

What intrigues me about the funds is the way they affect stock markets around the world. My guess is that they are so large, they tend to focus on large companies to remain liquid. If they do invest in smaller companies, I guess it’s possible they could easily end up owning large stakes that might increase the risk of antitrust issues. Is that helping to generate the outperformance, at least on stock markets, of very large companies? You can imagine these funds are helping boost, at the very least, the modern phenomenon of large companies dominating stock exchanges. 

Potential disruptors


This could be a negative in the longer term since you want your investment portfolio focused on potential disruptors rather than mature companies. But they also contribute to a general buy-and-hold strategy, one presumes, which reduces volatility. 

Think about the relative size here: the total equity value of the sovereign wealth funds in the list above is $9.6-trillion. That’s three times the size of the FTSE 100! The total value of the S&P 500 is about $50-trillion. So that means there is a lot of long-term holding out there. This view is supported by the figures, although the change could be for other reasons. The average annual standard deviation of the S&P 500 over history is probably about 20%. But over the past two decades, it has dropped to about 15%. 

Another intriguing question is whether countries that do not have budget surpluses (like South Africa) could try to trade their way out of their problems by setting aside a proportion of their budget for investment? It seems kinda silly and contradictory. But you know, investing in global capital markets would have been an infinitely better long-term proposition than bailing out state-owned enterprises, to take just one example. DM

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