Sovereign funds are already a part of the worldwide monetary panorama, though they usually fly underneath the radar. In Madrid, two of essentially the most emblematic buildings within the metropolis bear the seal of one in every of these automobiles. Originally known as KIO Towers—two leaning skyscrapers within the north of the capital, the place Santiago Segura awaited the arrival of the antichrist in The Day of the Beast (Álex de la Iglesia, 1995)—have been promoted by the Kuwait Investment Office (KIO), a pioneering sovereign fund that was additionally the protagonist of a number of actual plots in Spain within the Nineteen Eighties and Nineties. Today, these financial brokers transfer greater than 13 trillion euros worldwide, in keeping with information from the Global SWF platform.
A sovereign fund is a monetary automobile owned by a State that’s used to handle and make investments the nation’s sources over the long run. Its creation dates again to the Nineteen Fifties, when the oil-producing nations thought of what to do with the inexhaustible circulation of cash from the export of black gold. The first fund was that of Kuwait, however there are already greater than 100 nations and areas which have an instrument of this sort.
David Cano, companion of the advisory agency Afi and director of its asset supervisor, recollects that sovereign funds have been created “to avoid the ‘paradox of abundance’, that is, the economic crisis that a country can suffer as a consequence of the accumulation of imbalances derived from a period of strong expansion.” The most paradigmatic case is what happened with the economy of the Netherlands. There, the manna of natural gas discovered in the sixties caused a sharp increase in income in foreign currency, which caused the local currency to greatly appreciate. This ended up harming the competitiveness of the country’s non-oil exports and damaging the economy. In its initial conception, “a sovereign fund serves to guarantee the intergenerational transmission of resources, given the risk of the end of the raw material or its price correction,” recollects Cano.
It is the philosophy of the largest pure sovereign fund, Norway’s. Created in 1997 with royalties from oil exploitation, the vehicle has invested year after year in stocks around the world until reaching a volume of two billion euros (double the combined value of the Ibex companies). His investment tenacity has made him one of the largest shareholders in the Spanish market, but also in the large American technology companies. The first premise of its action is that it only invests outside of Norway. The second, that the fund invests under strict professional criteria, with the aim of maximizing the money of Norwegians.
Not all of them work this way. The one from Saudi Arabia, PIF, with 900,000 million under management, invests with much greater discretion: it controls 10% of London’s Heathrow airport, it is the main shareholder of the telco Saudi STC (owner of 10% of Telefónica), has 10% of the audiovisual platform DAZN and stakes in multiple Wall Street listed companies, Uber and Nintendo. He also owns the Newcastle United football team and the Saudi golf circuit. The Abu Dhabi fund is a key investor, for its part, in cell tower companies (a low-risk infrastructure asset), in other asset managers and even holds bitcoins.
From this oil canon, new investment vehicles began to emerge, such as those in China or Singapore, “where the source of income was no longer the exploitation of raw materials, but the export of manufactured goods,” says Cano. But with a similar spirit: look for investment options preferably outside their country of origin, to decouple this source of wealth from the national economy. In the event of a deep economic crisis, these funds could always be counted on.
Industrial policy tool
In the case of the sovereign fund presented on Thursday by Pedro Sánchez, its origin and purpose are very different. The fund – which is called “España Crece” – will use as a starting point the European funds that have not yet been spent from the plan launched by the EU to alleviate the economic effects of the pandemic. From there, the Government hopes to attract private investors – using guarantees, loans or capital instruments – to co-invest in these projects, and reach 120,000 million euros of mobilized resources. Of this amount, approximately half will be mobilized from the ICO, which plans to leverage on those initial 10.5 billion, as explained by Carlos Body, Minister of Economy.
Ignacio de la Torre, chief economist of the investment firm Arcano, doubts that as much money as that announced by Sánchez can be raised. Furthermore, it indicates that, since the purpose is not to manage the surplus of resources or diversify investments, “however to make use of it as one other device of commercial coverage, it could possibly entail important risks, as occurred with financial savings banks.” The economist remembers how in the era prior to the bursting of the real estate bubble in Spain, between 2002 and 2008, many of the savings banks—completely co-opted by politicians—ended up entering projects and companies to “invigorate the region’s economy” and ended with resounding failures, such as the Ciudad Real airport.
However, industrial policy is the norm in these times of retreat from globalization, and Spain is by no means the only country that has resorted to this figure in recent times. Ireland, Germany, the United Kingdom and the United States have announced – and even launched – various sovereign investment vehicles in recent years. With one name or another, it is difficult to find a State that does not make investments: if Joe Biden proposed the creation of a US sovereign fund, Donald Trump skyrocketed Intel’s stock with the purchase of 10% of the chip manufacturer with public money. France has its Future Investment Program endowed with more than 50,000 million euros.
The pattern appears unstoppable. States wish to play an more and more related position within the financial system and monetary markets. And, conversely, firms and nations in flip courtroom these deep-pocketed traders, particularly these backed by oil. In 2023, the primary world affiliation of sovereign wealth funds met in Madrid, and Spanish establishments spared no expense to put out the very best pink carpet for them.
https://cincodias.elpais.com/fondos-y-planes/2026-01-17/los-fondos-soberanos-un-bazuca-de-13-billones-que-emerge-al-calor-del-nuevo-industrialismo.html