sovereign-wealth fund business definition

Investment assets held by a sovereign entity in another sovereign's currency. A sovereign-wealth fund results when a country runs current account surpluses and accumulates more reserves than are required for ordinary needs. For example, China announced in May 2007 that it would invest $3 billion of its foreign exchange reserves in the private-equity firm Blackstone. Later the same year, Abu Dhabi invested $7.5 billion for a 5% stake in Citibank. Some individuals have expressed concern that sovereign-wealth funds may invest for political as well as financial motives.