Get Sovereign Wealth Fund Exposure With These ETFs
Many Americans may not realize it, but there is a massive amount of money sitting in sovereign wealth funds. To be precise, the world's sovereign wealth funds hold almost $5.1 trillion, according to the Sovereign Wealth Fund Institute.
Not surprisingly, the primary funding source for these vehicles comes by way of oil and gas resources. For investors, how a country's sovereign wealth fund is funded is not as important as knowing that the fund exists. While it may be difficult to measure the qualitative impact of sovereign wealth funds, these vehicles can serve as a backstop for the countries that have them in times of economic tumult.
Indeed, the best way of looking at a large sovereign wealth fund may be to compare it a large cash hoard on a company's balance sheet. The investment community may not have yet priced that cash into the stock, but it is comforting to know it exists.
Here are some ETFs that track countries with massive sovereign wealth funds:
Global X Norway ETF (NYSE: NORW) What country has the world's second-largest sovereign wealth fund after Abu Dhabi?
Saudi Arabia? No. Kuwait? Wrong again? China? Nope. The answer is Norway. This oil-funded vehicle has about $600 billion in assets, which is more than the country's GDP, Global X CEO Bruno del Ama said in an interview with Benzinga.
del Ama pointed out that people do not know how to value Norway's sovereign treasure chest, but the fund can help mitigate the impact of lower oil prices and smooth out economic volatility if need be. There are myriad reasons to consider investing in Norway and the sovereign wealth fund is added, unheralded bonus.
iShares MSCI Singapore Index Fund (NYSE: EWS) Singapore-based Temasek is sovereign fund with almost $160 billion in assets, according to SWFI, but investors cannot overlook the fact that city-state's government has a fund with nearly $250 billion in assets. As is the case with Norway, investors focus on other high points with Singapore, including its status as a rising Asian financial capital and a AAA credit rating.
EWS allocates 47 percent of its weight to financials and, while Singapore's banks are not in trouble, it is comforting to know the sovereign wealth fund could be deployed should the banking sector need help.
iShares Chile Investable Market Index Fund (NYSE: ECH) Chile may not be the first country investors think of when it comes to sovereign investment vehicles, but the government has $15 billion in a sovereign wealth fund, according to Bloomberg.
That may not sound like much compared to Norway or Singapore, but the SWFI rankings put Chile's sovereign wealth fund ahead of Brazil's.
Since Chile is the world's largest copper producer, investors view the country as a materials play despite a diverse, vibrant economy. The good news is Chile, like Norway, can use its sovereign wealth fund to dampen declining commodities prices.
WisdomTree Middle East Dividend Fund (NASDAQ: GULF) Of the 15 largest sovereign wealth funds in the world, five are found in countries that GULF offers exposure to. That includes the almost $630 billion Abu Dhabi Investment Authority, the world's largest sovereign fund. Kuwait and Qatar also have substantial sovereign funds. Combined, the United Arab Emirates, Qatar and Kuwait represent 77 percent of GULF's weight.
If the sovereign wealth fund exposure does not convince one to look at GULF, perhaps a 30-day SEC yield of 4.78 percent will.
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