what is a sovereign wealth fund(SWF), and how do they work?
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Country has spare money. Country sets up Sovereign Wealth Fund that uses the spare money to invest in stock markets and such in general, so they can make a profit off of the spare money that government had. So essentially, it’s countries that are investing.
You know how the US is massively in debt and cant afford to have nice things? A sovereign wealth fund in the opposite. It’s when countries actually run a surplus and put the extra money away in a wealth fund. Over time the interest from that fund can be used to fund government programs.
It’s basically a country investing any extra money that otherwise wouldn’t be used. It’s how [England can own a share of OneWeb](https://www.gov.uk/government/news/uk-government-secures-satellite-network-oneweb) and stuff.
it’s the same as any investment fund, just managed by the state instead of a firm. You might have heard about the Alaska Permanent Dividend, which cuts each resident of Alaska a check every year. That’s funded by an SWF Alaska established using their oil revenue. The fund appreciates in value, the Alaskan government shares some of the profits with the people.
The biggest sources are oil/natural resources and government pension programs. In both situations the government has a source of income (pension contributions, revenue from state owned oil enterprises or tax revenue on privatized oil extraction) and a clear future need for funding (to support pensioners, to cushion the budget and economy when the oil dries up).
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