National wealth fund

A national wealth fund (NWF) is a state-owned holding company owning and managing public commercial assets, including;

National wealth funds are mainly active in the domestic market, but some have expanded to invest internationally.

Contrary to sovereign wealth funds (SWFs), who are mostly funded by revenues from commodity exports or from foreign-exchange reserves held by the central bank, NWFs have been set up to actively manage public commercial assets acquired historically by the state or after private-sector failures.

A sovereign wealth fund (SWF) is primarily a fund manager, concerned with managing reserve liquidity and like a hedge fund typically investing in securities traded on major mature markets. SWFs are designed to optimize a portfolio of liquid assets and securities, through continual securities trading to achieve balance between risk and returns. An example is GIC of Singapore.

A national wealth fund (NWF) is an asset manager, concerned with active management of a portfolio of operational assets, similar to that of a private-equity fund. The purpose is to maximize the portfolio value through active management including the development, restructuring and monetization of the individual assets. An example is Temasek Holdings of Singapore.

The idea of governing public assets in a separate balance sheet, outside the government bureaucracy, is not entirely new. Possibly the first external public asset governance company the world saw was Caisse des dépôts et consignations, the Deposits and Consignments Fund, in France, which was established in 1816 to restore confidence following the Napoleonic Wars. Its primary mission was, and still is, long-term investment to promote economic development in France, managing savings, retirement pensions, and financing for social housing, education, and social security.

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